AFS 2023 Part 2

National Bank of Canada

01 December 2023

 

Regulatory Announcement

National Bank of Canada

December 1^st, 2023

2023 Annual Financial Statements (Part 2)

National Bank of Canada (the "Bank") announces publication of its 2023 Annual Report, including the audited consolidated financial statements for the years ended 31 October 2023 and 2022, together with the notes thereto and independent auditor's report thereon (the "2023 Financial Statements"). The 2023 Financial Statements have been uploaded to the National Storage Mechanism and will shortly be available at https://data.fca.org.uk/#/nsm/nationalstoragemechanism and are available on the Bank's website as part of the 2023 Annual Report at https://www.nbc.ca/about-us/investors.html

To view the full PDF of the 2023 Financial Statements, the 2023 Annual Report and the 2023 Annual CEO and CFO Certifications, please click on the following links:

http://www.rns-pdf.londonstockexchange.com/rns/4436V_1-2023-12-1.pdf
http://www.rns-pdf.londonstockexchange.com/rns/4436V_2-2023-12-1.pdf
http://www.rns-pdf.londonstockexchange.com/rns/4436V_3-2023-12-1.pdf

Note 8 - Financial Assets Transferred But Not Derecognized

In the normal course of its business, the Bank enters into transactions in which it transfers financial assets such as securities or loans directly to third parties, in particular structured entities. According to the terms of some of those transactions, the Bank retains substantially all of the risks and rewards related to those financial assets. The risks include credit risk, interest rate risk, foreign exchange risk, prepayment risk, and other price risks, whereas the rewards include the income streams associated with the financial assets. As such, those financial assets are not derecognized and the transactions are treated as collateralized or secured borrowings. The nature of those transactions is described below.

Securities Sold Under Repurchase Agreements and Securities Loaned

When securities are sold under repurchase agreements and securities loaned under securities lending agreements, the Bank transfers financial assets to third parties in accordance with the standard terms for such transactions. These third parties may have an unlimited right to resell or repledge the financial assets received. If cash collateral is received, the Bank records the cash along with an obligation to return the cash, which is included in Obligations related to securities sold under repurchase agreements and securities loaned on the Consolidated Balance Sheet. Where securities are received as collateral, the Bank does not record the collateral on the Consolidated Balance Sheet.

Financial Assets Transferred to Structured Entities

Under the Canada Mortgage Bond (CMB) program, the Bank sells securities backed by insured residential mortgages and other securities to Canada Housing Trust (CHT), which finances the purchase through the issuance of insured mortgage bonds. Third-party CMB investors have legal recourse only to the transferred assets. The cash received for these transferred assets is treated as a secured borrowing, and a corresponding liability is recorded in Liabilities related to transferred receivables on the Consolidated Balance Sheet.

The following table provides additional information about the nature of the transferred financial assets that do not qualify for derecognition and the associated liabilities.

As at October 31			2023		2022
Carrying value of financial assets transferred but not derecognized
	Securities(1)		91,097		76,551
	Residential mortgages		23,227		24,102
			114,324		100,653
Carrying value of associated liabilities(2)			62,295		56,555
Fair value of financial assets transferred but not derecognized
	Securities(1)		91,098		76,551
	Residential mortgages		22,002		22,954
			113,100		99,505
Fair value of associated liabilities(2)			61,468		55,767

(1)    The amount related to the securities loaned is the maximum amount of Bank securities that can be lent. For obligations related to securities sold under repurchase agreements, the amount includes the Bank's own financial assets as well as those of third parties.

(2)    Associated liabilities include liabilities related to transferred receivables and obligations related to securities sold under repurchase agreements before the offsetting impact of $6,994 million as at October 31, 2023 ($3,606 million as at October 31, 2022). Liabilities related to securities loaned are not included, as the Bank can lend its own financial assets and those of third parties. The carrying value and fair value of liabilities related to securities loaned stood at $10,171 million before the offsetting impact of $2,090 million as at October 31, 2023 ($8,843 million before the offsetting impact of $2,043 million as at October 31, 2022).

The following table specifies the nature of the transactions related to financial assets transferred but not derecognized.

As at October 31			2023		2022
Carrying value of financial assets transferred but not derecognized
	Securities backed by insured residential mortgages and other securities sold to CHT		24,313		25,468
	Securities sold under repurchase agreements		40,357		33,880
	Securities loaned		49,654		41,305
			114,324		100,653

 Note 9 - Investments in Associates and Joint Ventures

As at October 31				2023		2022
		Business segment		Carrying value		Carrying value
Listed associate
	TMX Group Limited(1)	Other		−		96
Unlisted associates				49		44
				49		140

(1)    On May 2, 2023, the Bank concluded that it had lost significant influence over TMX Group Limited (TMX) and therefore, as of this date, ceased using the equity method to account for this investment. The Bank designated its investment in TMX as a financial asset measured at fair value through other comprehensive income in an amount of $191 million. Upon the fair value measurement, a $91 million gain was recorded in the Non-interest income - Other item of the Consolidated Statement of Income, reported in the Other heading of segment results. As at October 31, 2022, the Bank was exercising significant influence over TMX, mainly through its equity interest, debt financing, and presence on TMX's board of directors, and the Bank's ownership interest in TMX was 2.5%. During the year ended October 31, 2023, TMX paid $3 million in dividends to the Bank ($7 million for the year ended October 31, 2022).

As at October 31, 2023 and 2022, there were no significant restrictions limiting the ability of associates to transfer funds to the Bank in the form of dividends or to repay any loans or advances. Furthermore, the Bank has not made any specific commitment or contracted any contingent liability with respect to associates.

The table below provides summarized financial information related to the Bank's proportionate share in all unlisted associates that are not individually significant.

Year ended October 31(1)		2023		2022
Net income		6		5
Other comprehensive income		−		−
Comprehensive income		6		5

(1)    The amounts are based on the cumulative balances for the 12-month periods ended September 30, 2023 and 2022.

Note 10 - Premises and Equipment

		Owned assets held												Right-of-use  assets		Total
		Land	Head office building under construction(1)	Buildings		Computer equipment		Equipment and furniture		Leasehold improvements		Total		Real estate
Cost
As at October 31, 2021		71	248	68		255		110		338		1,090		732		1,822
	Additions and modifications	3	183	2		53		14		46		301		69		370
	Disposals	−	−	(7)		−		(3)		(2)		(12)				(12)
	Fully depreciated assets			(7)		(38)		(7)		(10)		(62)		(8)		(70)
	Impact of foreign currency translation	−	−	−		6		3		5		14		12		26
As at October 31, 2022		74	431	56		276		117		377		1,331		805		2,136
	Additions and modifications	−	222	3		70		8		53		356		59		415
	Disposals	−	−	(7)		−		(13)		(27)		(47)				(47)
	Transfers(2)	−	(397)	386		4		7		−		−		−		−
	Fully depreciated assets			(2)		(35)		(3)		(8)		(48)		(4)		(52)
	Impact of foreign currency translation	−	−	−		2		−		1		3		3		6
As at October 31, 2023		74	256	436		317		116		396		1,595		863		2,458
Accumulated depreciation
As at October 31, 2021				47		150		55		156		408		198		606
	Depreciation for the year			2		48		15		32		97		105		202
	Disposals			(4)		−		(3)		(2)		(9)				(9)
	Fully depreciated assets			(7)		(38)		(7)		(10)		(62)		(8)		(70)
	Impact of foreign currency translation			−		2		1		3		6		4		10
As at October 31, 2022				38		162		61		179		440		299		739
	Depreciation for the year			4		55		10		36		105		106		211
	Disposals			(5)		−		(13)		(27)		(45)				(45)
	Impairment losses(3)			−		−		−		−		−		11		11
	Fully depreciated assets			(2)		(35)		(3)		(8)		(48)		(4)		(52)
	Impact of foreign currency translation			−		1		−		−		1		1		2
As at October 31, 2023				35		183		55		180		453		413		866
Carrying value as at October 31, 2022		74	431	18		114		56		198		891		506		1,397
Carrying value as at October 31, 2023		74	256	401		134		61		216		1,142		450		1,592

(1)    As at October 31, 2023, contractual commitments related to the head office building under construction stood at $86 million, covering a period up to 2025.

(2)    During the year ended October 31, 2023, the Bank started occupying certain floors of the new head office building under construction. As a result, an amount related to significant components being utilized was transferred to their corresponding asset categories.

(3)    During the year ended October 31, 2023, the Bank recorded $11 million in impairment losses related to right-of-use assets (no amount was recorded during the year ended October 31, 2022). These impairment losses were recognized in the Non-interest expenses - Occupancy  item of the Consolidated Statement of Income and reported in the Other heading of segment results.

Assets Leased Under Operating Leases

The Bank is a lessor under operating lease agreements for certain buildings. These leases have terms varying from one year to five years and do not contain any bargain purchase options or contingent rent.

The future minimum payments receivable under these operating leases total $6 million and include sublease revenues of $5 million related to real estate right-of-use assets.

Note 10 - Premises and Equipment (cont.)

Leases Recognized in the Consolidated Statement of Income

Year ended October 31		2023		2022
Interest expense		17		16
Expense for leases of low-value assets(1)		10		9
Expense relating to variable lease payments		100		94
Income from leasing and subleasing(2)		4		4

(1)   The expense relates to lease payments for low-value assets that are part of the exemptions permitted by the practical expedients of IFRS 16.

(2)   These amounts for the years ended October 31, 2023 and 2022 include variable lease payments of $2 million.

For the year ended October 31, 2023, the cash outflows for leases amounted to $229 million (2022: $218 million).

Note 11 - Goodwill and Intangible Assets

Goodwill

The following table presents changes in the carrying amounts of goodwill by cash-generating unit (CGU) and by business segment for the years ended October 31, 2023 and 2022.

			Personal and Commercial(1)		Wealth Management						Financial Markets(1)		USSF&I						Other		Total
					Third-Party Solutions(1)	Securities Brokerage(1)	Managed Solutions(1)		Total				Credigy Ltd.(1)		Advanced Bank of Asia Limited(1)		Total		Flinks Technology Inc.(1)
Balance as at October 31, 2021			54		256	434	269		959		235		31		124		155		101		1,504
	Impact of foreign currency   translation		−		−	−	−		−		−		3		12		15		−		15
Balance as at October 31, 2022			54		256	434	269		959		235		34		136		170		101		1,519
	Impact of foreign currency   translation		−		−	−	−		−		−		−		2		2		−		2
Balance as at October 31, 2023			54		256	434	269		959		235		34		138		172		101		1,521

(1)    Constitutes a CGU.

Goodwill Impairment Testing and Significant Assumptions

For impairment testing purposes, goodwill resulting from a business combination must be allocated, as of the acquisition date, to a CGU or group of CGUs expected to benefit from the synergies of the business combination. Goodwill is tested for impairment annually or more frequently if events or circumstances indicate that the recoverable value of the CGU or group of CGUs may have fallen below its carrying amount.

Goodwill was tested for impairment during the years ended October 31, 2023 and 2022, and no impairment loss was recognized.

The recoverable value of a CGU or group of CGUs is based on the value in use that is calculated based on discounted after-tax cash flows. Future after-tax cash flows are estimated based on a five-year period, which is the reference period used for the most recent financial forecasts approved by management. Cash flows beyond that period are extrapolated using a long-term growth rate.

The discount rate used for each CGU or group of CGUs is calculated using the cost of debt financing and the cost related to the Bank's equity. This rate corresponds to the Bank's weighted average cost of capital and reflects the risk specific to the CGU. The long-term growth rate used in calculating discounted cash flow estimates is based on the forecasted growth rate plus a risk premium. The rate is constant over the entire five-year period for which the cash flows were determined. Growth rates are determined, among other factors, based on past growth rates, economic trends, inflation, competition, and the impact of the Bank's strategic initiatives. As at October 31, 2023, for each CGU or CGU group, the discount rate (after tax) used was 9.78% (9.48% as at October 31, 2022), and the long-term growth rate varied between 2% and 5%, depending on the CGU, as at October 31, 2023 and 2022.

Estimating a CGU's value in use requires significant judgment regarding the inputs used in applying the discounted cash flow method. The Bank conducts sensitivity analyses by varying the after-tax discount rate upward by 1% and the terminal growth rates downward by 1%. Such sensitivity analyses demonstrate that a reasonable change in assumptions would not result in a CGU's carrying value exceeding its value in use.

Intangible Assets

		Indefinite useful life							Finite useful life						Total
		Management contracts(1)	Trademark		Total		Internally- generated software(2)		Other software		Other intangible assets		Total
Cost
As at October 31, 2021		160	9		169		1,908		120		64		2,092		2,261
	Acquisitions	−	−		−		346		28		−		374		374
	Impairment losses(3)	(1)	(1)		(2)		(7)		−		(2)		(9)		(11)
	Fully amortized intangible assets						(138)		(21)		(2)		(161)		(161)
	Impact of foreign currency translation	−	−		−		−		1		−		1		1
As at October 31, 2022		159	8		167		2,109		128		60		2,297		2,464
	Acquisitions	−	−		−		282		17		−		299		299
	Disposals	−	−		−		(19)		−		−		(19)		(19)
	Impairment losses(3)	(1)	(1)		(2)		(315)		−		−		(315)		(317)
	Fully amortized intangible assets						(168)		(18)		−		(186)		(186)
As at October 31, 2023		158	7		165		1,889		127		60		2,076		2,241
Accumulated amortization
As at October 31, 2021							861		75		51		987		987
	Amortization for the year						253		20		6		279		279
	Impairment losses(3)						(2)		−		(1)		(3)		(3)
	Fully amortized intangible assets						(138)		(21)		(2)		(161)		(161)
	Impact of foreign currency translation						−		2		−		2		2
As at October 31, 2022							974		76		54		1,104		1,104
	Amortization for the year						287		20		6		313		313
	Disposals						(6)		−		−		(6)		(6)
	Impairment losses(3)						(240)		−		−		(240)		(240)
	Fully amortized intangible assets						(168)		(18)		−		(186)		(186)
As at October 31, 2023							847		78		60		985		985
Carrying value as at October 31, 2022		159	8		167		1,135		52		6		1,193		1,360
Carrying value as at October 31, 2023		158	7		165		1,042		49		−		1,091		1,256

(1)    For annual impairment testing purposes, management contracts are allocated to the Managed Solutions CGU.

(2)    The remaining amortization period for significant internally-generated software is four years.

(3)    During the year ended October 31, 2023, the Bank recorded $2 million in impairment losses resulting from the impairment test carried out on indefinite-life intangible assets ($2 million during the year ended October 31, 2022) as well as an amount of $75 million related to internally-generated software for which the Bank has decided to cease its use or development ($5 million during the year ended October 31, 2022). The impairment losses related to internally-generated software were recognized in the Non‑interest expenses - Technology item of the Consolidated Statement of Income and reported in the Personal and Commercial ($59 million), Wealth Management ($8 million), Financial Markets ($7 million) segments and in the Other heading ($1 million) of segment results. 

Note 12 - Other Assets 

As at October 31		2023		2022
Receivables, prepaid expenses and other items		3,126		2,186
Interest and dividends receivable		1,605		1,057
Due from clients, dealers and brokers		538		842
Defined benefit asset (Note 23)		356		498
Deferred tax assets (Note 24)		634		389
Current tax assets		925		471
Reinsurance assets		14		6
Insurance assets		147		104
Commodities(1)		544		405
		7,889		5,958

(1)    Commodities are recorded at fair value based on quoted prices in active markets and are classified in Level 1 of the fair value measurement hierarchy. The commodities were previously presented in Receivables, prepaid expenses and other items.

Note 13 - Deposits

As at October 31						2023				2022
		On demand(1)		After notice(2)		Fixed term(3)		Total		Total
Personal		4,335		35,289		48,259		87,883		78,811
Business and government		66,823		32,602		97,903		197,328		184,230
Deposit-taking institutions		1,579		114		1,269		2,962		3,353
		72,737		68,005		147,431		288,173		266,394

(1)    Demand deposits are deposits for which the Bank does not have the right to require notice of withdrawal and consist essentially of deposits in chequing accounts.

(2)    Notice deposits are deposits for which the Bank may legally require a notice of withdrawal and consist mainly of deposits in savings accounts.

(3)    Fixed-term deposits are deposits that can be withdrawn by the holder on a specified date and include term deposits, guaranteed investment certificates, savings accounts and plans, covered bonds, and other similar instruments.

The Deposits - Business and government item includes, among other items, covered bonds, as described below, and a $17.7 billion amount of deposits as at October 31, 2023 ($12.8 billion as at October 31, 2022) that are subject to the bank bail-in conversion regulations issued by the Government of Canada. These regulations provide certain powers to the Canada Deposit Insurance Corporation (CDIC), notably the power to convert certain eligible Bank shares and liabilities into common shares should the Bank become non-viable.

Covered Bonds

NBC Covered Bond Guarantor (Legislative) Limited Partnership

In December 2013, the Bank established the covered bond legislative program under which covered bonds are issued. It therefore created NBC Covered Bond Guarantor (Legislative) Limited Partnership (the Guarantor) to guarantee payment of the principal and interest owed to the bondholders. The Bank sold uninsured residential mortgages to the Guarantor and granted it loans to facilitate the acquisition of these assets. During the year ended October 31, 2023, the Bank issued 280 million Swiss francs and 1.0 billion euros in covered bonds, and 1.5 billion euros in covered bonds came to maturity (the Bank issued 1.3 billion euros, US$1.5 billion and 750 million pounds sterling in covered bonds, and 1.0 billion euros and US$1.0 billion in covered bonds came to maturity during the year ended October 31, 2022). The covered bonds totalled $10.9 billion as at October 31, 2023 ($10.4 billion as at October 31, 2022). For additional information, see Note 27 to these consolidated financial statements.

The Bank has limited access to the assets owned by this structured entity according to the terms of the agreements that apply to this transaction. The assets owned by this entity totalled $20.9 billion as at October 31, 2023 ($18.2 billion as at October 31, 2022), of which $20.6 billion ($17.9 billion as at October 31, 2022) is presented in Residential mortgage loans on the Bank's Consolidated Balance Sheet.

Note 14 - Other Liabilities

As at October 31		2023		2022
Accounts payable and accrued expenses		2,458		2,582
Subsidiaries' debts to third parties		224		156
Interest and dividends payable		2,022		1,063
Lease liabilities		517		552
Due to clients, dealers and brokers		669		730
Defined benefit liability (Note 23)		94		111
Allowances for credit losses - Off-balance-sheet commitments (Note 7)		176		162
Deferred tax liabilities (Note 24)		28		14
Current tax liabilities		208		67
Insurance liabilities		11		10
Other items(1)(2)(3)		1,016		914
		7,423		6,361

(1)    As at October 31, 2023, Other items included $42 million in litigation provisions ($11 million as at October 31, 2022).

(2)    As at October 31, 2023, Other items included $31 million in provisions for onerous contracts ($33 million as at October 31, 2022).

(3)    As at October 31, 2023, Other items included the financial liability resulting from put options written to non-controlling interests of Flinks for an amount of $23 million ($33 million as at October 31, 2022).

Note 15 - Subordinated Debt

The subordinated debt represents direct unsecured obligations, in the form of notes and debentures, to the Bank's debt holders. The rights of the Bank's note and debenture holders are subordinate to the claims of depositors and certain other creditors. Approval from OSFI is required before the Bank can redeem its subordinated notes and debentures in whole or in part.

On February 1, 2023, the Bank redeemed $750 million of medium-term notes maturing on February 1, 2028 at a price equal to their nominal value plus accrued interest.

On August 31, 2022, the Bank had redeemed debentures denominated in a foreign currency and maturing on February 28, 2087 in an amount of US$7 million at their nominal value plus accrued interest.

On July 25, 2022, the Bank had issued medium-term notes for an amount of $750 million, bearing interest at 5.426% and maturing on August 16, 2032.

As at October 31						2023		2022
Maturity date		Interest rate			Redemption date
February 2028		3.183%			February 1, 2023	−		750
August 2032(1)		5.426%	(2)		August 16, 2027(3)	750		750
						750		1,500
Fair value hedge adjustment(4)						−		2
Unamortized issuance costs(5)						(2)		(3)
Total						748		1,499

(1)    These notes contain non-viability contingent capital (NVCC) provisions and qualify for the purposes of calculating regulatory capital under Basel III. In the case of a trigger event as defined by OSFI, each note will be automatically and immediately converted, on a full and permanent basis, without the consent of the holder, into a specified number of common shares of the Bank as determined using an automatic conversion formula with a multiplier of 1.5 and a conversion price based on the greater of: (i) a floor price of $5.00; (ii) the current market price of common shares, which represents the volume weighted average price of common shares for the ten trading days ending on the trading day preceding the date of the trigger event. If the common shares are not listed on an exchange when this price is being established, the price will be the fair value reasonably determined by the Bank's Board. The number of shares issued is determined by dividing the par value of the note (plus accrued and unpaid interest on such note) by the conversion price and then applying the multiplier.

(2)    Bearing interest at a rate of 5.426%, payable semi-annually until August 16, 2027, and thereafter bearing interest at a floating rate equal to CORRA compounded daily plus 2.32%, payable quarterly.

(3)    With the prior approval of OSFI, the Bank may, at its option, redeem these notes in whole or in part, at their nominal value plus accrued and unpaid interest.

(4)    The fair value hedge adjustment represents the impact of the hedging transactions applied to hedge changes in the fair value of subordinated debt caused by interest rate fluctuations.

(5)    The unamortized costs related to the issuance of the subordinated debt represent the initial cost, net of accumulated amortization, calculated using the effective interest rate method.

Note 16 - Derivative Financial Instruments

Derivative financial instruments are financial contracts whose value is derived from an underlying interest rate, exchange rate, equity price, commodity price, credit spread, or index.

The main types of derivative financial instruments used are presented below.

Forwards and Futures

Forwards and futures are contractual obligations to buy or sell a specified amount of currency, interest rate, commodity, or financial instrument on a specified future date at a specified price. Forwards are tailor-made agreements transacted in the over-the-counter market. Futures are traded on organized exchanges and are subject to cash margining calculated daily by clearing houses.

Swaps

Swaps are over-the-counter contracts in which two parties agree to exchange cash flows. The Bank uses the following types of swap contracts:

·     Cross-currency swaps are transactions in which counterparties exchange fixed-rate interest payments and principal payments in different currencies.

·     Interest rate swaps are transactions in which counterparties exchange fixed- and floating-rate interest payments based on the notional principal value in the same currency.

·     Commodity swaps are transactions in which counterparties exchange fixed- and floating-rate payments based on the notional principal value of a commodity.

·     Equity swaps are transactions in which counterparties agree to exchange the return on one equity or group of equities for a payment based on an interest rate benchmark.

·     Credit default swaps are transactions in which one of the parties agrees to pay returns to the other party so that the latter can make a payment if a credit event occurs.

Options

Options are agreements between two parties in which the writer of the option grants the buyer the right, but not the obligation, to buy or sell, either at a specified date or dates or at any time prior to a predetermined expiry date, a specific amount of currency, commodity, or financial instrument at an agreed-upon price upon the sale of the option. The writer receives a premium for the sale of this instrument.

Notional Amounts⁽¹⁾

As at October 31		2023														2022
		Term to maturity										Contracts held for trading purposes		Contracts designated as hedges
		3 months or less		Over 3 months to  12 months		Over 1 year to 5 years		Over 5 years		Total contracts						Total contracts
Interest rate contracts
OTC contracts
Forward rate agreements
	Not settled by central counterparties	8,077		1,035		−		−		9,112		9,112		−		8,505
Swaps
	Not settled by central counterparties	3,681		10,571		72,130		54,055		140,437		138,135		2,302		121,384
	Settled by central counterparties	192,142		222,675		391,902		141,129		947,848		876,491		71,357		921,657
Options purchased		−		996		4,347		2,044		7,387		7,265		122		5,919
Options written		602		785		5,126		2,106		8,619		8,088		531		9,010
		204,502		236,062		473,505		199,334		1,113,403		1,039,091		74,312		1,066,475
Exchange-traded contracts
Futures
	Long positions	12,381		29,624		2,463		−		44,468		44,468		−		28,472
	Short positions	24,066		30,587		8,765		−		63,418		63,418		−		62,205
Options purchased		14		−		−		−		14		14		−		3,000
Options written		14		−		−		−		14		14		−		1,362
		36,475		60,211		11,228		−		107,914		107,914		−		95,039
Foreign exchange contracts
OTC contracts
Forwards		32,985		13,430		7,590		629		54,634		54,634		−		82,172
Swaps		259,006		98,177		109,135		34,523		500,841		480,017		20,824		515,684
Options purchased		16,564		15,029		4,445		−		36,038		36,038		−		34,831
Options written		17,596		19,312		4,253		−		41,161		41,161		−		39,477
		326,151		145,948		125,423		35,152		632,674		611,850		20,824		672,164
Exchange-traded contracts
Futures
	Long positions	69		−		−		−		69		69		−		72
	Short positions	28		−		−		−		28		28		−		55
		97		−		−		−		97		97		−		127
Equity, commodity and
	credit derivative contracts(2)
OTC contracts
Forwards		11		−		3,568		−		3,579		3,579		−		3,735
Swaps
	Not settled by central counterparties	31,001		19,684		20,439		9,909		81,033		80,889		144		65,569
	Settled by central counterparties	176		99		6,417		708		7,400		7,400		−		4,633
Options purchased		4,976		315		916		12		6,219		6,219		−		1,822
Options written		51		468		2,459		351		3,329		3,329		−		2,371
		36,215		20,566		33,799		10,980		101,560		101,416		144		78,130
Exchange-traded contracts
Futures
	Long positions	1,913		621		411		85		3,030		3,030		−		4,789
	Short positions	19,161		2,135		1,146		3		22,445		22,445		−		13,452
Options purchased		10,536		1,880		2,204		−		14,620		14,620		−		9,142
Options written		10,187		2,324		3,677		137		16,325		16,325		−		11,490
		41,797		6,960		7,438		225		56,420		56,420		−		38,873
		645,237		469,747		651,393		245,691		2,012,068		1,916,788		95,280		1,950,808

(1)    Notional amounts are not presented in assets or liabilities on the Consolidated Balance Sheet. They represent the reference amount of the contract to which a rate or price is applied to determine the amount of cash flows to be exchanged.

(2)    Includes precious metal contracts.

Note 16 - Derivative Financial Instruments (cont.)

Credit Risk 

Credit risk on derivative financial instruments is the risk of financial loss that the Bank will have to assume if a counterparty fails to honour its contractual obligations. Credit risk related to derivative financial instruments is subject to the same credit approval, credit limit, and credit monitoring standards as those applied to the Bank's other credit transactions. Consequently, the Bank evaluates the creditworthiness of counterparties and manages the size of the portfolios as well as the diversification and maturity profiles of these financial instruments.

The Bank limits the credit risk of over-the-counter contracts by dealing with creditworthy counterparties and entering into contracts that provide for the exchange of collateral between parties where the fair value of the outstanding transactions exceeds an agreed threshold. The Bank also negotiates master netting agreements that provide for the simultaneous close-out and settling of all transactions with a given counterparty on a net basis in the event of default, insolvency, or bankruptcy. However, overall exposure to credit risk, reduced through master netting agreements, may change substantially after the balance sheet date because it is affected by all transactions subject to a contract as well as by changes in the market rates of the underlying instruments.

The Bank also uses financial intermediaries to have access to established clearing houses in order to minimize the settlement risk arising from financial derivative transactions. In some cases, the Bank has direct access to clearing houses for settling derivative financial instruments. In addition, certain derivative financial instruments traded over the counter are settled directly or indirectly by central counterparties.

In the case of exchange-traded contracts, exposure to credit risk is limited because these transactions are standardized contracts executed on established exchanges, each of which is associated with a well-capitalized clearing house that assumes the obligations of both counterparties and guarantees their performance obligations. All exchange-traded contracts are subject to initial margins and daily settlement.

Terms Used

Replacement Cost

Replacement cost is the Bank's maximum credit risk associated with derivative financial instruments as at the Consolidated Balance Sheet date. This amount is the positive fair value of all derivative financial instruments, before all master netting agreements and collateral held.

Credit Risk Equivalent

The credit risk equivalent amount is the total replacement cost plus an amount representing the potential future credit risk exposure, as outlined in OSFI's Capital Adequacy Requirements Guideline.

Risk-Weighted Amount

The risk-weighted amount is determined by applying the OSFI guidance to the credit risk equivalent.

Credit Risk Exposure of the Derivative Financial Instrument Portfolio

As at October 31			2023						2022
			Replacement cost		Credit risk equivalent(1)		Risk- weighted amount(1)		Replacement cost		Credit risk equivalent(1)		Risk- weighted amount(1)
Interest rate contracts			6,708		3,024		457		5,490		2,639		508
Foreign exchange contracts			7,233		5,607		1,582		8,775		5,926		1,847
Equity, commodity and credit derivative contracts			3,575		8,544		1,428		4,282		6,569		1,797
			17,516		17,175		3,467		18,547		15,134		4,152
Impact of master netting agreements			(8,032)						(9,583)
			9,484		17,175		3,467		8,964		15,134		4,152

(1)    The amounts are presented net of the Impact of master netting agreements.

Credit Risk Exposure of the Derivative Financial Instrument Portfolio by Counterparty

As at October 31			2023				2022
			Replacement cost		Credit risk equivalent		Replacement cost		Credit risk equivalent
OECD member-country governments			928		3,052		1,342		2,700
Banks of OECD member countries			606		3,236		589		3,292
Other			7,950		10,887		7,033		9,142
			9,484		17,175		8,964		15,134

Fair Value of Derivative Financial Instruments

As at October 31			2023						2022
			Positive		Negative		Net		Positive		Negative		Net
Contracts held for trading purposes
Interest rate contracts
	Forwards		147		54		93		125		85		40
	Swaps		4,753		4,700		53		3,267		3,620		(353)
	Options		179		208		(29)		168		166		2
			5,079		4,962		117		3,560		3,871		(311)
Foreign exchange contracts
	Forwards		878		368		510		1,426		919		507
	Swaps		5,550		6,004		(454)		6,461		7,140		(679)
	Options		588		544		44		707		597		110
			7,016		6,916		100		8,594		8,656		(62)
Equity, commodity and credit derivative contracts
	Forwards		40		244		(204)		911		314		597
	Swaps		2,573		3,741		(1,168)		1,926		3,717		(1,791)
	Options		962		2,424		(1,462)		1,440		1,793		(353)
			3,575		6,409		(2,834)		4,277		5,824		(1,547)
Total - Contracts held for trading purposes			15,670		18,287		(2,617)		16,431		18,351		(1,920)
Contracts designated as hedges
Interest rate contracts
	Swaps		1,629		1,384		245		1,930		1,137		793
	Options		−		11		(11)		−		35		(35)
			1,629		1,395		234		1,930		1,172		758
Foreign exchange contracts
	Swaps		217		181		36		182		109		73
			217		181		36		182		109		73
Equity, commodity and credit derivative contracts
	Swaps		−		25		(25)		4		−		4
			−		25		(25)		4		−		4
Total - Contracts designated as hedges			1,846		1,601		245		2,116		1,281		835
	Designated as fair value hedges		928		902		26		1,186		586		600
	Designated as cash flow hedges		918		699		219		930		695		235
Total fair value			17,516		19,888		(2,372)		18,547		19,632		(1,085)
Impact of master netting agreements			(8,032)		(8,032)		−		(9,583)		(9,583)		−
			9,484		11,856		(2,372)		8,964		10,049		(1,085)

Note 17 - Hedging Activities

The Bank's market risk exposure, risk management objectives, policies and procedures, and risk measurement methods are presented in the Risk Management section of the MD&A for the year ended October 31, 2023.

The Bank has elected, as permitted under IFRS 9, to continue applying the hedge accounting requirements of IAS 39. Some of the tables present information on currencies, specifically, the U.S. dollar (USD), the Australian dollar (AUD), the Canadian dollar (CAD), the Hong Kong dollar (HKD), the euro (EUR), the pound sterling (GBP) and the Swiss franc (CHF).

Note 17 - Hedging Activities (cont.)

The following table shows the notional amounts and the weighted average rates by term to maturity of the designated derivative instruments and their fair value by type of hedging relationship.

As at October 31																		2023																	2022
						Term to maturity																Total			Fair value					Total			Fair value
						1 year or less				Over 1 year to 2 years				Over 2 years to 5 years				Over 5 years							Assets		Liabilities						Assets		Liabilities
Fair value hedges
Interest rate risk
	Interest rate swaps																								928		858						1,176		527
		Notional amount - CDOR reform(1)				594				2,850				3,527				638				7,609								10,730
		Notional amount - Other				10,515				2,317				9,768				6,268				28,868								11,559
		Average fixed interest rate - Pay fixed				0.4	%			1.2	%			2.2	%			3.3	%			2.1	%							1.7	%
		Average fixed interest rate - Receive fixed				5.3	%			3.4	%			3.0	%			3.3	%			4.1	%							2.0	%
	Cross-currency swaps																								−		33						10		24
		Notional amount				−				−				−				112				112								192
		Average USD-AUD exchange rate				−				−				−			$	0.6943			$	0.6943							$	0.7381
		Average CAD-HKD exchange rate				−				−				−				−				−							$	0.1621
		Average USD-EUR exchange rate				−				−				−			$	1.0513			$	1.0513							$	1.0513
	Options																								−		11						−		35
		Notional amount - CDOR reform(1)																				−								30
		Notional amount - Other				−				−				122				531				653								959
		Average fixed interest rate - Purchased				−				−				(1.3)	%			−				(1.3)	%							(1.2)	%
		Average fixed interest rate - Written				−				−				−				2.4	%			2.4	%							2.8	%
						11,109				5,167				13,417				7,549				37,242			928		902			23,470			1,186		586
Cash flow hedges
Interest rate risk
	Interest rate swaps																								701		526						754		610
		Notional amount - CDOR reform(1)				371				1,605				3,693				1,550				7,219								12,400
		Notional amount - Other				6,020				3,643				18,759				1,541				29,963								20,455
		Average fixed interest rate - Pay fixed				2.8	%			3.5	%			3.4	%			3.5	%			3.3	%							1.9	%
		Average fixed interest rate - Receive fixed				3.1	%			0.7	%			2.5	%			3.4	%			2.6	%							1.9	%
	Cross-currency swaps																								217		148						172		85
		Notional amount - CDOR reform(1)				391				1,225				2,297				−				3,913								3,888
		Notional amount - Other				3,301				4,337				9,151				−				16,789								9,202
		Average CAD-USD exchange rate			$	1.3112			$	1.3093			$	1.3161				−			$	1.3133							$	1.2972
		Average USD-EUR exchange rate			$	1.1534			$	1.1487			$	1.1308				−			$	1.1402							$	1.1691
		Average USD-GBP exchange rate			$	1.2853				−			$	1.1945				−			$	1.2207							$	1.2375
		Average CHF-USD exchange rate				−				−			$	1.0064				−			$	1.0064
Equity price risk
	Equity swaps
		Notional amount - CDOR reform(1)				144				−				−				−				144			−		25			136			4		−
		Average price			$	101.63				−				−				−			$	101.63							$	86.36
						10,227				10,810				33,900				3,091				58,028			918		699			46,081			930		695
Hedges of net investments
	in foreign operations(2)
Foreign exchange risk
	Cross-currency swaps
		Notional amount				10				−				−				−				10			−		−			10			−		−
		Average CAD-USD exchange rate			$	1.3209				−				−				−			$	1.3209							$	1.3802
		Average USD-HKD exchange rate			$	0.1280				−				−				−			$	0.1280							$	0.1275
						10				−				−				−				10			−		−			10			−		−
						21,346				15,977				47,317				10,640				95,280			1,846		1,601			69,561			2,116		1,281

(1)    Includes only contracts that reference CDOR and that mature after June 28, 2024.

(2)    As at October 31, 2023, the Bank also designated $1,892 million in foreign currency deposits denominated in U.S. dollars as net investment hedging instruments ($1,410 million as at October 31, 2022).

Fair Value Hedges

Fair value hedge transactions consist of using derivative financial instruments (interest rate swaps and options) to hedge changes in the fair value of a financial asset or financial liability caused by interest rate fluctuations. Changes in the fair values of derivative financial instruments used as hedging instruments offset changes in the fair value of the hedged items. The Bank applies this strategy mainly to portfolios of securities measured at fair value through other comprehensive income, fixed-rate mortgage loans, fixed-rate deposits, liabilities related to transferred receivables, and subordinated debt.

In addition, when a fixed-rate asset or liability is denominated in a foreign currency, the Bank sometimes uses cross-currency swaps to hedge the associated foreign exchange risk. The Bank may designate a cross-currency swap to exchange the fixed-rate foreign currency for the functional currency at a floating rate in a single hedging relationship addressing both interest rate risk and foreign exchange risk. In certain cases, given that interest rate risk and foreign exchange risk are hedged in a single hedging relationship, the information below does not distinguish between interest rate risk and the combination of interest rate risk and foreign exchange risk as two separate risk categories. The Bank applies this strategy mainly to foreign currency fixed-rate deposits.

Regression analysis is used to assess hedge effectiveness and determine the hedge ratio. For fair value hedges, the main source of potential hedge ineffectiveness is a circumstance where the critical terms of the hedging instrument and the hedged item are not closely aligned.

The following tables show amounts related to hedged items as well as the results of the fair value hedges.

							As at October 31, 2023				Year ended October 31, 2023
					Carrying value of hedged items		Cumulative hedge adjustments from active hedges		Cumulative adjustments from discontinued hedges		Gains (losses) on the hedged items for ineffectiveness measurement(1)		Gains (losses) on the hedging instruments for ineffectiveness measurement(1)		Hedge ineffectiveness(1)
Securities at fair value through other comprehensive income					6,068		(332)		(211)		(191)		189		(2)
Mortgages					2,882		(213)		(224)		(12)		28		16
Deposits					17,728		(606)		(168)		214		(219)		(5)
Liabilities related to transferred receivables					4,155		(186)		13		202		(202)		−
											213		(204)		9

							As at October 31, 2022				Year ended October 31, 2022
					Carrying value of hedged items		Cumulative hedge adjustments from active hedges		Cumulative adjustments from discontinued hedges		Gains (losses) on the hedged items for ineffectiveness measurement(1)		Gains (losses) on the hedging instruments for ineffectiveness measurement(1)		Hedge ineffectiveness(1)
Securities at fair value through other comprehensive income					6,805		(529)		(53)		(588)		589		1
Mortgages					6,488		(332)		(231)		(415)		453		38
Deposits					5,803		(595)		9		682		(677)		5
Liabilities related to transferred receivables					682		(3)		68		3		(3)		−
Subordinated debt					2		−		2		−		−		−
											(318)		362		44

(1)    Amounts are presented on a pre-tax basis.

Note 17 - Hedging Activities (cont.)

Cash Flow Hedges

Cash flow hedge transactions consist of using interest rate swaps to hedge the risk of changes in future cash flows caused by floating-rate assets or liabilities. In addition, the Bank sometimes uses cross-currency swaps to hedge the foreign exchange risk caused by assets or liabilities denominated in foreign currencies. In certain cases, given that interest rate risk and foreign exchange risk are hedged in a single hedging relationship, the information below does not distinguish between interest rate risk and the combination of interest rate risk and foreign exchange risk as two separate risk categories. The Bank applies this strategy mainly to its loan, personal credit line, acceptance, and deposit portfolios as well as liabilities related to transferred receivables.

The Bank also uses total return swaps to hedge the risk of changes in future cash flows related to the Restricted Stock Unit (RSU) Plan. Some of these swaps are designated as part of a cash flow hedge against a portion of the unrecognized obligation of the RSU Plan. In cash flow hedges, the derivative financial instruments used as hedging instruments reduce the variability of the future cash flows related to the hedged items.

Regression analysis is used to assess hedge effectiveness and to determine the hedge ratio. For cash flow hedges, the main source of potential hedge ineffectiveness is a circumstance where the critical terms of the hedging instrument and the hedged item are not closely aligned.

The following tables show the amounts related to hedged items as well as the results of the cash flow hedges.

				As at October 31, 2023								Year ended October 31, 2023
				Accumulated other comprehensive income from active hedges		Accumulated other comprehensive income from discontinued hedges		Gains (losses) on hedged items for ineffectiveness measurement(1)		Gains (losses) on hedging instruments for ineffectiveness measurement(1)		Hedge ineffectiveness(1)		Unrealized gains (losses) included in Other comprehensive income as the effective portion of the hedging instrument(1)		Losses (gains) reclassified to Net interest income(1)
Interest rate risk
	Loans			(170)		(240)		127		(131)		(3)		(127)		128
	Deposits			127		117		(666)		667		8		223		(17)
	Acceptances			59		266		(54)		52		−		52		(52)
	Liabilities related to transferred
		receivables		11		49		6		(6)		−		(6)		(25)
				27		192		(587)		582		5		142		34
Equity price risk
	Other liabilities			(16)		−		17		(17)		−		(17)		−
				11		192		(570)		565		5		125		34

				As at October 31, 2022								Year ended October 31, 2022
				Accumulated other comprehensive income from active hedges		Accumulated other comprehensive income from discontinued hedges		Gains (losses) on hedged items for ineffectiveness measurement(1)		Gains (losses) on hedging instruments for ineffectiveness measurement(1)		Hedge ineffectiveness(1)		Unrealized gains (losses) included in Other comprehensive income as the effective portion of the hedging instrument(1)		Losses (gains) reclassified to Net interest income(1)
Interest rate risk
	Loans			(169)		(241)		357		(356)		−		(356)		33
	Deposits			28		10		257		(253)		−		62		−
	Acceptances			210		115		(253)		255		2		253		23
	Liabilities related to transferred
		receivables		64		27		(54)		55		1		54		(11)
				133		(89)		307		(299)		3		13		45
Equity price risk
	Other liabilities			−		−		47		(47)		−		(47)		−
				133		(89)		354		(346)		3		(34)		45

(1)    Amounts are presented on a pre-tax basis.

Hedges of Net Investments in Foreign Operations

The Bank's structural foreign exchange risk arises from investments in foreign operations denominated in currencies other than the Canadian dollar. The Bank measures this risk by assessing the impact of foreign currency fluctuations and hedges it using derivative and non-derivative financial instruments (cross-currency swaps and deposits). In a hedge of a net investment in a foreign operation (net investment hedge), the financial instruments used offset the foreign exchange gains and losses on the investments. When non-derivative financial instruments are designated as foreign exchange risk hedges, only the changes in fair value that are attributable to foreign exchange risk are taken into account when assessing and calculating the effectiveness of the hedge.

Assessing the effectiveness of net investment hedges consists of comparing changes in the carrying value of the deposits or the fair value of the derivative attributable to exchange rate fluctuations with changes in the net investment in a foreign operation attributable to exchange rate fluctuations. Inasmuch as the notional amount of the hedging instruments and the hedged net investments are aligned, no ineffectiveness is expected.

The following tables present the amounts related to hedged items as well as the results of the net investment hedges.

As at October 31, 2023

Year ended October 31, 2023

Accumulated other comprehensive income from active hedges

Accumulated other comprehensive income from discontinued hedges

Gains (losses) on hedged items for ineffectiveness measurement(1)

Gains (losses) on hedging instruments for ineffectiveness measurement(1)

Hedge ineffectiveness(1)

Unrealized gains (losses) included in Other comprehensive income as the effective portion of the hedging instrument(1)

Losses (gains) reclassified to the Non-interest income(1)

Net investments in foreign

operations denominated in:

USD

38

(353)

66

(66)

−

(66)

−

As at October 31, 2022

Year ended October 31, 2022

Accumulated other comprehensive income from active hedges

Accumulated other comprehensive income from discontinued hedges

Gains (losses) on hedged items for ineffectiveness measurement(1)

Gains (losses) on hedging instruments for ineffectiveness measurement(1)

Hedge ineffectiveness(1)

Unrealized gains (losses) included in Other comprehensive income as the effective portion of the hedging instrument(1)

Losses (gains) reclassified to the Non-interest income(1)

Net investments in foreign

operations denominated in:

USD

26

(276)

166

(166)

−

(166)

−

(1)    Amounts are presented on a pre-tax basis.

Note 17 - Hedging Activities (cont.)

Reconciliation of Equity Components

The following table presents a reconciliation by risk category of Accumulated other comprehensive income attributable to hedge accounting.

As at October 31				2023				2022
				Net gains (losses) on cash flow hedges		Net foreign currency translation adjustments		Net gains (losses) on cash flow hedges		Net foreign currency translation adjustments
Balance at beginning				31		204		23		(129)
Hedges of net investments in foreign operations(1)
	Gains (losses) included as the effective portion					(66)				(166)
	Net foreign currency translation gains (losses) on investments    in foreign operations					152				458
Cash flow hedges(1)
	Gains (losses) included as the effective portion
		Interest rate risk		142				13
		Equity price risk		(17)				(47)
	Losses (gains) reclassified to Net interest income
		Interest rate risk		34				45
Income taxes				(44)		17		(3)		41
Balance at end				146		307		31		204

(1)    Amounts are presented on a pre-tax basis.

Note 18 - Share Capital and Other Equity Instruments

Authorized

Common Shares

An unlimited number of shares without par value.

First Preferred Shares

An unlimited number of shares, without par value, issuable for a maximum aggregate consideration of $5 billion.

First Preferred Shares and Other Equity Instruments

													As at October 31, 2023
				Redemption and conversion date(1)(2)			Redemption  price per share or LRCN ($)(1)			Convertible into preferred shares(2)			Dividend per share ($) or interest rate per LRCN(3)			Reset premium of the dividend rate or interest rate
First preferred shares
	issued and outstanding
		Series 30(4)		May 15, 2024	(5)(6)		25.00			Series 31			0.25156	(7)		2.40	%
		Series 32(4)		February 15, 2025	(5)(6)		25.00			Series 33			0.23994	(7)		2.25	%
		Series 38(4)		November 15, 2027	(5)(6)		25.00			Series 39			0.43919	(7)		3.43	%
		Series 40(4)		May 15, 2028	(5)(6)		25.00			Series 41			0.36363	(7)		2.58	%
		Series 42(4)		November 15, 2023	(5)(6)		25.00			Series 43			0.30938	(8)		2.77	%
Other equity instruments
	issued and outstanding
		Limited Recourse Capital Notes (LRCN)
		Series 1 (LRCN - Series 1)(9)(10)		October 15, 2025	(5)		1,000.00			Series 44	(9)		4.30	%(11)		3.943	%
		Series 2 (LRCN - Series 2)(9)(10)		July 15, 2026	(5)		1,000.00			Series 45	(9)		4.05	%(11)		3.045	%
		Series 3 (LRCN - Series 3)(9)(10)		October 16, 2027	(5)		1,000.00			Series 46	(9)		7.50	%(11)		4.281	%
First preferred shares
	authorized but not issued
		Series 31(4)		May 15, 2024	(5)		25.00	(12)		n.a.			Floating rate	(13)		2.40	%
		Series 33(4)		February 15, 2025	(5)		25.00	(12)		n.a.			Floating rate	(13)		2.25	%
		Series 39(4)		November 15, 2027	(5)		25.00	(12)		n.a.			Floating rate	(13)		3.43	%
		Series 41(4)		May 15, 2028	(5)		25.00	(12)		n.a.			Floating rate	(13)		2.58	%
		Series 43(4)		November 15, 2023	(5)		25.50	(14)		n.a.			Floating rate	(13)		2.77	%

n.a.    Not applicable

(1)      Redeemable in cash at the Bank's option, in whole or in part, subject to the provisions of the Bank Act (Canada) and to OSFI approval. For the preferred shares, the redemption prices are increased by all the declared and unpaid dividends on the preferred shares to the date fixed for redemption. In the case of LRCN, the redemption prices are increased by interest accrued and unpaid up to the redemption date.

(2)      Convertible at the option of the holders of first preferred shares issued and outstanding, subject to certain conditions.

(3)      The dividends are non-cumulative and payable quarterly, whereas interest on the LRCN is payable semi-annually.

(4)      Upon the occurrence of a trigger event, as defined by OSFI, each outstanding preferred share will be automatically and immediately converted, on a full and permanent basis, without the consent of the holder, into a number of Bank common shares determined pursuant to an automatic conversion formula. This conversion will be calculated by dividing the value of the preferred shares, i.e., $25.00 per share, plus all declared and unpaid dividends as at the date of the trigger event, by the value of the common shares. The value of the common shares will be the greater of a $5.00 floor price or the current market price of the common shares. Current market price means the volume weighted average trading price of common shares for the ten consecutive trading days ending on the trading day preceding the date of the trigger event. If the common shares are not listed on an exchange when this price is being established, the price will be the fair value reasonably determined by the Bank's Board.

(5)      For the preferred shares, redeemable at the date fixed for redemption and on the same date every five years thereafter. In the case of LRCN, the redemption occurs automatically upon the redemption of the preferred shares issued by the Bank in conjunction with the LRCN and held in a limited recourse trust. The preferred shares issued and held in a limited recourse trust are redeemable for a period of one month from the date fixed for redemption and on the same dates every five years thereafter.   

(6)      Convertible on the date fixed for conversion and on the same date every five years thereafter, subject to certain conditions.

(7)      The dividend amount is set for the five-year period commencing on May 16, 2019 for Series 30, on February 16, 2020 for Series 32, on November 16, 2022 for Series 38, and on May 16, 2023 for Series 40 and ending on the redemption date. Thereafter, these shares carry a non-cumulative quarterly fixed dividend in an amount per share determined by multiplying the rate of interest equal to the sum of the five-year Government of Canada bond yield on the applicable fixed-rate calculation date by $25.00, plus the reset premium.

(8)      The dividend amount is set for the initial period ending on the date fixed for redemption. Thereafter, these shares carry a non-cumulative quarterly fixed dividend in an amount per share determined by multiplying the rate of interest equal to the sum of the five-year Government of Canada bond yield on the applicable fixed-rate calculation date by $25.00, plus the reset premium.

Note 18 - Share Capital and Other Equity Instruments (cont.)

(9)      The LRCN - Series 1, LRCN - Series 2 and LRCN - Series 3 are notes for which recourse is limited to the assets held by an independent trustee in a consolidated limited recourse trust. The trust assets consist of Series 44, Series 45 and Series 46 preferred shares issued by the Bank in conjunction with the LRCN - Series 1, LRCN - Series 2 and LRCN - Series 3. In the event of (i) non-payment of interest on any of the interest payment dates, (ii) non-payment of the redemption amount upon redemption of the LRCN, (iii) non-payment of the principal amount upon maturity of the LRCN, or (iv) an event of default in respect of the LRCN, the noteholders will have recourse only to the assets of the trust, and each noteholder will be entitled to its pro rata share of the assets of the trust. In such circumstances, delivery of the assets of the trust will eliminate all of the Bank's obligations with respect to the LRCN. The LRCN - Series 1, LRCN - Series 2 and LRCN - Series 3 are redeemable at maturity or earlier to the extent that the Bank redeems the Series 44, Series 45 and Series 46 preferred shares from the date fixed for redemption, and subject to OSFI's consent and approval.

(10)    The Series 44, Series 45 and Series 46 preferred shares issued by the Bank in conjunction with the LRCN - Series 1, LRCN - Series 2 and LRCN - Series 3 are held by a consolidated limited recourse trust on the Bank's balance sheet and are therefore eliminated for financial reporting purposes. Upon the occurrence of a trigger event, as defined by OSFI; (i) each LRCN will be automatically redeemed and the redemption price will be covered by delivery of the trust's assets that consist of Series 44, Series 45 and Series 46 preferred shares; (ii) each outstanding preferred share will be automatically and immediately converted on a full and permanent basis, without the consent of the holder, into a number of Bank common shares determined pursuant to an automatic conversion formula. This conversion will be calculated by dividing the value of the preferred shares, i.e., $1,000 per share, plus all accrued and unpaid interest as at the date of the trigger event, by the value of the common shares. The value of the common shares will be the greater of a $5.00 floor price or the current market price of the common shares. Current market price means the volume weighted average trading price of common shares for the ten consecutive trading days ending on the trading day preceding the date of the trigger event. If the common shares are not listed on an exchange when this price is being established, the price will be the fair value reasonably determined by the Bank's Board.

(11)    The interest rate is set for the initial period ending on the date fixed for redemption. Every five years thereafter until November 15, 2075 for the LRCN - Series 1, until August 15, 2076 for the LRCN - Series 2 and until November 16, 2077 for the LRCN - Series 3, the interest rate on the notes will be adjusted and will be an annual interest rate equal to the five-year Government of Canada bond yield on the applicable interest rate calculation date, plus the interest rate reset premium.

(12)    As of the date fixed for redemption, and every five years thereafter, the redemption price will be $25.00 per share.

(13)    The dividend period begins as of the date fixed for redemption. The amount of the floating quarterly non-cumulative dividend is determined by multiplying by $25.00 the rate of interest equal to the sum of the 90-day Government of Canada treasury bill yield on the floating rate calculation date, plus the reset premium.

(14)    As of the date fixed for redemption, the redemption price will be $25.50 per share. Thereafter, on the same date every five years, the redemption price will be $25.00 per share.

Second Preferred Shares

15 million shares without par value, issuable for a maximum aggregate consideration of $300 million. As at October 31, 2023, no shares had been issued or traded.

Shares and Other Equity Instruments Outstanding

As at October 31				2023				2022
				Number of shares or LRCN		Shares or LRCN $		Number of shares or LRCN		Shares or LRCN $
First Preferred Shares
		Series 30		14,000,000		350		14,000,000		350
		Series 32		12,000,000		300		12,000,000		300
		Series 38		16,000,000		400		16,000,000		400
		Series 40		12,000,000		300		12,000,000		300
		Series 42		12,000,000		300		12,000,000		300
				66,000,000		1,650		66,000,000		1,650
Other equity instruments
		LRCN - Series 1		500,000		500		500,000		500
		LRCN - Series 2		500,000		500		500,000		500
		LRCN - Series 3		500,000		500		500,000		500
				1,500,000		1,500		1,500,000		1,500
Preferred shares and other equity instruments				67,500,000		3,150		67,500,000		3,150
Common shares at beginning of year				336,582,124		3,196		337,912,283		3,160
Issued pursuant to the Stock Option Plan				1,678,321		95		1,193,663		61
Repurchase of common shares for cancellation				−		−		(2,500,000)		(24)
Impact of shares purchased or sold for trading(1)				31,975		3		(18,295)		(1)
Other				(7,791)		−		(5,527)		−
Common shares at end of year				338,284,629		3,294		336,582,124		3,196

(1)    As at October 31, 2023, a total of 26,725 shares were sold short for trading, representing an amount of $3 million (5,250 shares were held for trading, representing a negligible amount as at October 31, 2022).

 Dividends Declared and Distributions on Other Equity Instruments

Year ended October 31				2023				2022
				Dividends or interest $		Dividends per share		Dividends or interest $		Dividends per share
First Preferred Shares
		Series 30		14		1.0063		14		1.0063
		Series 32		12		0.9598		12		0.9598
		Series 38		28		1.7568		18		1.1125
		Series 40		16		1.3023		14		1.1500
		Series 42		14		1.2375		14		1.2375
				84				72
Other equity instruments
		LRCN - Series 1(1)		21				21
		LRCN - Series 2(2)		20				20
		LRCN - Series 3(3)		38				6
				79				47
Preferred shares and other equity instruments				163				119
Common shares				1,344		3.9800		1,206		3.5800
				1,507				1,325

(1)   The LRCN - Series 1 bear interest at a fixed rate of 4.30% per annum.

(2)   The LRCN - Series 2 bear interest at a fixed rate of 4.05% per annum.

(3)   The LRCN - Series 3 bear interest at a fixed rate of 7.50% per annum.

Issuances of Other Equity Instruments

On September 8, 2022, the Bank had issued $500 million of LRCN - Series 3 for which recourse of the noteholders is limited to the assets held by an independent trustee in a consolidated limited recourse trust. The trust's assets consist of $500 million of Series 46 first preferred shares issued by the Bank in conjunction with the LRCN - Series 3. The LRCN - Series 3 sell for $1,000 each and bear interest at a fixed rate of 7.50% per annum until November 16, 2027 exclusively and, thereafter, at an annual rate equal to the five-year Government of Canada bond yield plus 4.281% until November 16, 2077. The LRCN - Series 3 mature on November 16, 2082.

In the event of (i) non-payment of interest on any of the interest payment dates, (ii) non-payment of the redemption amount upon redemption of the LRCN, (iii) non-payment of the principal amount upon maturity of the LRCN, or (iv) an event of default in respect of the notes, the noteholders will have recourse only to the assets of the trust, and each noteholder will be entitled to its pro rata share of the assets of the trust. In such circumstances, delivery of the trust's assets will eliminate all of the Bank's obligations with respect to the LRCN. The LRCN - Series 3 are redeemable at maturity or earlier to the extent that the Bank redeems the Series 46 preferred shares on certain redemption dates specified in the terms and conditions of said preferred shares, and subject to OSFI's consent and approval.

Given that the LRCN - Series 3 satisfy the non-viability contingent capital requirements, they qualify for the purposes of calculating regulatory capital under Basel III.

Note 18 - Share Capital and Other Equity Instruments (cont.)

Repurchases of Common Shares

On December 12, 2022, the Bank began a normal course issuer bid to repurchase for cancellation up to 7,000,000 common shares (representing approximately 2.1% of its then outstanding common shares) over the 12-month period ending on December 11, 2023. On December 10, 2021, the Bank had begun a normal course issuer bid to repurchase for cancellation up to 7,000,000 common shares (representing approximately 2% of its then outstanding common shares) over the 12-month period ended December 9, 2022. Any repurchase through the Toronto Stock Exchange is done at market prices. The common shares may also be repurchased through other means authorized by the Toronto Stock Exchange and applicable regulations, including private agreements or share repurchase programs under issuer bid exemption orders issued by the securities regulators. A private purchase made under an exemption order issued by a securities regulator will be done at a discount to the prevailing market price. The amounts that are paid above the average book value of the common shares are charged to Retained earnings. During the year ended October 31, 2023, the Bank did not repurchase any common shares. During the year ended October 31, 2022, the Bank had repurchased 2,500,000 common shares for $245 million, which had reduced Common share capital by $24 million and Retained earnings by $221 million.

Reserved Common Shares

As at October 31, 2023 and 2022, there were 15,507,568 common shares reserved under the Dividend Reinvestment and Share Purchase Plan. As at October 31, 2023, there were 20,063,688 common shares reserved under the Stock Option Plan (21,742,009 as at October 31, 2022).

Restriction on the Payment of Dividends

The Bank is prohibited from declaring dividends on its common or preferred shares if there are reasonable grounds for believing that the Bank would, by so doing, be in contravention of the regulations of the Bank Act (Canada) or OSFI's capital adequacy and liquidity guidelines. In addition, the ability to pay common share dividends is restricted by the terms of the outstanding preferred shares pursuant to which the Bank may not pay dividends on its common shares without the approval of the holders of the outstanding preferred shares, unless all preferred share dividends have been declared and paid or set aside for payment.

Dividend Reinvestment and Share Purchase Plan

The Bank has a Dividend Reinvestment and Share Purchase Plan for holders of its common and preferred shares under which they can acquire common shares of the Bank without paying commissions or administration fees. Participants acquire common shares through the reinvestment of cash dividends paid on the shares they hold or through optional cash payments of at least $1 per payment, up to a maximum of $5,000 per quarter. Common shares subscribed by participants are purchased on their behalf in the secondary market through the Bank's transfer agent, Computershare Trust Company of Canada, at a price equal to the average purchase price of the common shares during the three business days immediately following the dividend payment date.

Note 19 - Non-Controlling Interests

As at October 31		2023		2022
Flinks Technology Inc.(1)		2		2

(1)    As at October 31, 2023 and 2022, the non-controlling interest in Flinks stood at 14.1%.

Note 20 - Capital Disclosure

Capital Management Objectives, Policies and Procedures

Capital management has a dual role of ensuring a competitive return to the Bank's shareholders while maintaining a solid capital foundation that covers the risks inherent to the Bank's business, supports its business segments, and protects its clients.

The Bank's capital management policy defines the guiding principles as well as the roles and responsibilities regarding its internal capital adequacy assessment process. This process is a key tool in establishing the Bank's capital strategy and is subject to quarterly reviews and periodic amendments.

Capital Management

Capital ratios are obtained by dividing capital (as defined by OSFI's Capital Adequacy Requirements Guideline) by risk-weighted assets and are expressed as percentages. Risk-weighted assets are calculated in accordance with the rules established by OSFI for on- and off-balance-sheet risks. Credit, market, and operational risks are factored into the risk-weighted assets calculation for regulatory purposes. The definition adopted by the Basel Committee on Banking Supervision (BCBS) distinguishes between three types of capital. Common Equity Tier 1 (CET1) capital consists of common shareholders' equity less goodwill, intangible assets, and other CET1 capital deductions. Additional Tier 1 (AT1) capital consists of eligible non-cumulative preferred shares, limited recourse capital notes, and other AT1 capital adjustments. The sum of CET1 and AT1 capital forms what is known as Tier 1 capital. Tier 2 capital consists of the eligible portion of subordinated debt and certain allowances for credit losses. Total regulatory capital is the sum of Tier 1 and Tier 2 capital.

The Bank and all other major Canadian banks have to maintain the following minimum capital ratios established by OSFI: a CET1 capital ratio of at least 11.0%, a Tier 1 capital ratio of at least 12.5%, and a Total capital ratio of at least 14.5%. All of these ratios include a capital conservation buffer of 2.5% established by the Basel Committee on Banking Supervision and OSFI, a 1.0% surcharge applicable solely to Domestic Systemically Important Banks (D-SIBs), and a 3.0% domestic stability buffer. On December 8, 2022, OSFI expanded the domestic stability buffer range, setting it at 0% to 4.0% instead of the previous range of 0% to 2.5%, and it announced that the domestic stability buffer would rise from 2.5% to 3.0% effective February 1, 2023. On June 20, 2023, OSFI raised the buffer by 50 bps to 3.5% effective November 1, 2023. The domestic stability buffer must consist exclusively of CET1 capital. A D‑SIB that fails to meet this buffer requirement will not be subject to automatic constraints to reduce capital distributions but must provide a remediation plan to OSFI. The Bank must also meet the requirements of an updated capital output floor that will ensure that its total calculated RWA is not below 72.5% of the total RWA as calculated under the Basel III Standardized Approaches. OSFI is allowing a phase-in of the floor factor over three years, starting at 65.0% in the second quarter of 2023 and rising 2.5% per year to reach 72.5% in fiscal 2026. If the capital requirement is less than the capital output floor requirement after applying the floor factor, the difference is added to total RWA. Lastly, OSFI requires D-SIBs to maintain a Basel III leverage ratio of at least 3.5%. Effective February 1, 2023, OSFI increased the leverage ratio minimum requirement by imposing a Tier 1 capital buffer of 0.5% applicable only to D-SIBs.

OSFI also requires D-SIBs to maintain a risk-based total loss-absorbing capacity (TLAC) ratio of at least 24.5% (including the domestic stability buffer) of risk-weighted assets and a TLAC leverage ratio of at least 7.25% (increase of 0.5% since February 1, 2023). The purpose of TLAC is to ensure that a D-SIB has sufficient loss-absorbing capacity to support its recapitalization in the unlikely event it becomes non-viable.

In the second quarter of 2023, the Bank implemented OSFI's finalized guidance relating to the Basel III reforms, consisting primarily of:

·    a revised Standardized Approach and Internal Ratings-Based (IRB) Approach for credit risk;

·    a revised Standardized Approach for operational risk;

·    a revised capital output floor;

·    a revised Leverage Ratio Framework; and

·    revised Pillar 3 disclosure requirements.

The Basel III reforms also affected the market risk and credit valuation adjustment (CVA) risk frameworks, which will be implemented in the first quarter of 2024.

During the years ended October 31, 2023 and 2022, the Bank was in compliance with all of OSFI's regulatory capital, leverage, and TLAC requirements.

Note 20 - Capital Disclosure (cont.)

Regulatory Capital⁽¹⁾, Leverage Ratio⁽¹⁾ and TLAC⁽²⁾

As at October 31			2023			2022
Capital
	CET1		16,920			14,818
	Tier 1		20,068			17,961
	Total		21,056			19,727
Risk-weighted assets			125,592			116,840
Total exposure			456,478			401,780
Capital ratios
	CET1		13.5	%		12.7	%
	Tier 1		16.0	%		15.4	%
	Total		16.8	%		16.9	%
Leverage ratio			4.4	%		4.5	%
Available TLAC			36,732			32,351
TLAC ratio			29.2	%		27.7	%
TLAC leverage ratio			8.0	%		8.1	%

(1)    Capital, risk-weighted assets, total exposure, the capital ratios, and the leverage ratio are calculated in accordance with the Basel III rules, as set out in OSFI's Capital Adequacy Requirements Guideline and Leverage Requirements Guideline. The calculation of the figures as at October 31, 2022 had included the transitional measure applicable to expected credit loss provisioning and the temporary measure regarding the exclusion of central bank reserves implemented by OSFI in response to the COVID-19 pandemic. These provisions ceased to apply on November 1, 2022 and April 1, 2023, respectively.

(2)    Available TLAC, the TLAC ratio, and the TLAC leverage ratio are calculated in accordance with OSFI's Total Loss Absorbing Capacity Guideline.

Note 21 - Trading Activity Revenues

Trading activity revenues consist of the net interest income and the non-interest income related to trading activities.

Net interest income comprises dividends related to financial assets and liabilities associated with trading activities and certain interest income related to the financing of these financial assets and liabilities, net of interest expenses.

Non-interest income consists of realized and unrealized gains and losses as well as interest income on securities measured at fair value through profit or loss, income from held-for-trading derivative financial instruments, changes in the fair value of loans at fair value through profit or loss, changes in the fair value of financial instruments designated at fair value through profit or loss, realized and unrealized gains and losses as well as interest expenses on obligations related to securities sold short, certain commission income as well as other income related to trading activities, and any applicable transaction costs.

Year ended October 31		2023		2022
Net interest income (loss)		(1,816)		682
Non-interest income
Trading revenues (losses)		2,677		543
Other revenues		19		5
		2,696		548
		880		1,230

Note 22 - Share-Based Payments

The compensation expense information provided below excludes the impact of hedging.

Stock Option Plan

The Bank's Stock Option Plan is for officers and other designated persons of the Bank and its subsidiaries. Under this plan, options are awarded annually and provide participants with the right to purchase common shares at an exercise price equal to the closing price of the Bank's common share on the Toronto Stock Exchange on the day preceding the award. The options vest evenly over a four-year period and expire ten years from the award date or, in certain circumstances set out in the plan, within specified time limits. The Stock Option Plan contains provisions for retiring employees that allow the participant's rights to continue vesting in accordance with the stated terms of the award agreement. The maximum number of common shares that may be issued under the Stock Option Plan was 20,063,688 as at October 31, 2023 (21,742,009 as at October 31, 2022). The number of common shares reserved for a participant may not exceed 5% of the total number of Bank shares issued and outstanding.

As at October 31		2023						2022
		Number of options		Weighted average exercise price				Number of options		Weighted average exercise price
Stock Option Plan
Outstanding at beginning		11,861,749		$	64.80			11,348,680		$	57.93
Awarded		1,416,060		$	94.05			1,771,588		$	96.35
Exercised		(1,678,321)		$	50.43			(1,193,663)		$	45.73
Cancelled(1)		(52,800)		$	87.49			(64,856)		$	76.10
Outstanding at end		11,546,688		$	70.37			11,861,749		$	64.80
Exercisable at end		7,471,041		$	61.18			7,344,536		$	55.50

(1)    Includes 8,096 expired options during the year ended October 31, 2023 (27,714 expired options during the year ended October 31, 2022).

Exercise price		Options outstanding		Options exercisable				Expiry date
$44.96		368,469		368,469				December 2023
$47.93		813,888		813,888				December 2024
$42.17		727,265		727,265				December 2025
$54.69		770,928		770,928				December 2026
$64.14		1,063,142		1,063,142				December 2027
$58.79		1,341,590		1,341,590				December 2028
$71.86		1,478,183		1,075,695				December 2029
$71.55		1,857,658		884,810				December 2030
$96.35		1,728,733		425,254				December 2031
$94.05		1,396,832		−				December 2032
		11,546,688		7,471,041

During the year ended October 31, 2023, the Bank awarded 1,416,060 stock options (1,771,588 stock options during the year ended October 31, 2022) with an average fair value of $14.76 per option ($13.24 for the year ended October 31, 2022).

The average fair value of options awarded was estimated on the award date using the Black-Scholes model as well as the following assumptions.

Year ended October 31		2023		2022
Risk-free interest rate		3.25%		1.79%
Expected life of options		7 years		7 years
Expected volatility		23.13%		22.68%
Expected dividend yield		4.23%		3.88%

Note 22 - Share-Based Payments (cont.)

The expected life of the options is based on historical data and is not necessarily representative of how the options will be exercised in the future. Expected volatility is extrapolated from the implied volatility of the Bank's share price and observable market inputs, which are not necessarily representative of actual results. The expected dividend yield represents the annualized dividend divided by the Bank's share price at the award date. The risk-free interest rate is based on the Canadian dollar swap curve at the award date. The exercise price is equal to the Bank's share price at the award date. No other market parameter has been included in the fair value measurement of the options.

For the year ended October 31, 2023, an $18 million compensation expense related to this plan was recognized in the Consolidated Statement of Income ($17 million for the year ended October 31, 2022).

Stock Appreciation Rights (SAR) Plan

The SAR Plan is for officers and other designated persons of the Bank and its subsidiaries. Under this plan, participants receive, upon exercising the right, a cash amount equal to the difference between the closing price of the Bank's common share on the Toronto Stock Exchange on the day preceding the exercise date and the closing price on the day preceding the award date. SARs vest evenly over a four-year period and expire ten years after the award date or, in certain circumstances set out in the plan, within specified time limits. The SAR Plan contains provisions for retiring employees that allow the participant's rights to continue vesting in accordance with the stated terms of the award agreement. For the years ended October 31, 2023 and 2022, a negligible compensation expense related to this plan was recognized in the Consolidated Statement of Income.

As at October 31		2023						2022
		Number of SARs			Weighted average exercise price			Number of SARs			Weighted average exercise price
SAR Plan(1)
Outstanding at beginning		207,841			$	60.73		266,075			$	57.61
Awarded		19,072			$	94.05		21,464			$	96.35
Exercised		(41,241)			$	55.64		(79,698)			$	59.89
Outstanding at end		185,672			$	65.29		207,841			$	60.73
Exercisable at end		124,531			$	55.53		130,319			$	51.31

(1)    No SARs cancelled or expired during the years ended October 31, 2023 and 2022.

Exercise price		SARs outstanding				SARs exercisable		Expiry date
$44.96		9,886				9,886		December 2023
$47.93		28,824				28,824		December 2024
$42.17		19,748				19,748		December 2025
$54.69		16,320				16,320		December 2026
$64.14		16,236				16,236		December 2027
$58.79		16,604				16,604		December 2028
$71.86		22,266				11,547		December 2029
$71.55		15,252				−		December 2030
$96.35		21,464				5,366		December 2031
$94.05		19,072				−		December 2032
		185,672				124,531

Deferred Stock Unit (DSU) Plans

The DSU Plans are for officers and other designated persons of the Bank and its subsidiaries as well as for directors. These plans allow the Bank to tie a portion of the value of the compensation of participants to the future value of the Bank's common shares. A DSU is a right that has a value equal to the closing price of a common share of the Bank on the Toronto Stock Exchange on the day preceding the award. DSUs generally vest evenly over four years. Additional DSUs are credited to the accounts of participants in an amount equal to the dividends declared on Bank common shares and vest evenly over the same period as the reference DSUs. DSUs may be cashed only when participants retire or leave the Bank or, for directors, when their term ends. The DSU Plans contain provisions for retiring employees whereby participants may continue vesting all units in accordance with the stated terms of the award agreement.

During the year ended October 31, 2023, the Bank awarded 37,477 DSUs at a weighted average price of $97.45 (39,227 DSUs at a weighted average price of $97.10 for the year ended October 31, 2022). A total of 483,735 DSUs were outstanding as at October 31, 2023 (551,539 DSUs as at October 31, 2022). For the year ended October 31, 2023, a $3 million compensation expense related to these plans was recognized in the Consolidated Statement of Income ($1 million for the year ended October 31, 2022).

Restricted Stock Unit (RSU) Plan

The RSU Plan is for certain officers and other designated persons of the Bank and its subsidiaries. The objective of this plan is to ensure that the compensation of certain officers and other designated persons is competitive and to foster retention. An RSU represents a right that has a value equal to the average closing price of the Bank's common share, as published by the Toronto Stock Exchange, over the ten trading days preceding the sixth business day in December. RSUs generally vest evenly over three years, although some RSUs vest on the sixth business day of December of the third year following the award date, i.e., the date on which all RSUs expire. Additional RSUs are credited to the accounts of participants in an amount equal to the dividends declared on the Bank's common shares and vest over the same period as the reference RSUs. The RSU Plan contains provisions for retiring employees whereby participants may continue vesting units in accordance with the stated terms of the award agreement.

During the year ended October 31, 2023, the Bank awarded 2,058,936 RSUs at a weighted average price of $96.42 (1,895,489 RSUs at a weighted average price of $99.59 for the year ended October 31, 2022). As at October 31, 2023, a total of 4,382,431 RSUs were outstanding (4,203,383 RSUs as at October 31, 2022). For the year ended October 31, 2023, a $173 million compensation expense related to this plan was recognized in the Consolidated Statement of Income ($172 million for the year ended October 31, 2022).

Performance Stock Unit (PSU) Plan

The PSU Plan is for officers and other designated persons of the Bank. The objective of this plan is to tie a portion of the value of the compensation of these officers and other designated persons to the future value of the Bank's common shares. A PSU represents a right that has a value equal to the average closing price of the Bank's common share, as published by the Toronto Stock Exchange, over the ten trading days preceding the sixth business day in December, adjusted upward or downward according to performance criteria, which is based on the Bank's total shareholder return (TSR) growth index over three years compared to the average TSR growth index of the comparator group composed of Canadian banks over three years. PSUs vest on the sixth business day of December of the third year following the award date, i.e., the date on which all PSUs expire. Additional PSUs are credited to the accounts of participants in an amount equal to the dividends declared on the Bank's common shares and vest over the same period as the reference PSUs. The PSU Plan contains provisions for retiring employees whereby participants may continue vesting units in accordance with the stated terms of the award agreement.

During the year ended October 31, 2023, the Bank awarded 234,706 PSUs at a weighted average price of $96.42 (238,082 PSUs at a weighted average price of $99.59 for the year ended October 31, 2022). As at October 31, 2023, a total of 745,764 PSUs were outstanding (739,359 PSUs as at October 31, 2022). For the year ended October 31, 2023, a $27 million compensation expense related to this plan was recognized in the Consolidated Statement of Income ($30 million for the year ended October 31, 2022).

Deferred Compensation Plan

This plan is exclusively for key employees of the Wealth Management segment. The purpose of this plan is to foster the retention of key employees and promote revenue growth and continuous profitability improvement within the Wealth Management segment. Under this plan, participants can defer a portion of their annual compensation, and the Bank may pay a contribution to key employees when certain financial objectives are met. Amounts awarded by the Bank and the compensation deferred by participants are invested in, among other items, Bank common share units. These share units represent a right that has a value equal to the closing price of the Bank's common share on the Toronto Stock Exchange on the award date. Additional units are credited to the accounts of participants in an amount equal to the dividends declared on the Bank's common shares. Share units representing the amounts awarded by the Bank vest evenly over four years. When a participant retires, or in certain cases when the participant's employment ceases, the participant receives a cash amount representing the value of the vested share units.

During the year ended October 31, 2023, the Bank awarded 161,713 share units at a weighted average price of $94.90 (129,464 share units at a weighted average price of $94.87 for the year ended October 31, 2022). As at October 31, 2023, a total of 2,229,248 share units were outstanding (2,036,524 share units as at October 31, 2022). For the year ended October 31, 2023, a $3 million compensation expense related to this plan was recognized in the Consolidated Statement of Income (a $19 million reversal of the compensation expense for the year ended October 31, 2022).

Employee Share Ownership Plan

Under the Bank's Employee Share Ownership Plan, employees who meet the eligibility criteria can contribute up to 8% of their annual gross salary by way of payroll deductions. The Bank matches 25% of the employee contribution up to a maximum of $1,500 per annum. Bank contributions vest to the employee after one year of uninterrupted participation in the plan. Subsequent contributions vest immediately. The Bank's contributions, amounting to $16 million for the year ended October 31, 2023 ($15 million for the year ended October 31, 2022), were recognized when paid in the Compensation and employee benefits item of the Consolidated Statement of Income. As at October 31, 2023, a total of 6,392,648 common shares were held for this plan (6,304,689 common shares as at October 31, 2022).

Plan shares are purchased on the open market and are considered to be outstanding for earnings per share calculations. Dividends paid on the Bank's common shares held for the Employee Share Ownership Plan are used to purchase other common shares on the open market.

Plan Liabilities and Intrinsic Value

Total liabilities arising from the Bank's share-based compensation plans amounted to $686 million as at October 31, 2023 ($716 million as at October 31, 2022). The intrinsic value of these liabilities that had vested as at October 31, 2023 was $345 million ($359 million as at October 31, 2022).

Note 23 - Employee Benefits - Pension Plans and Other Post-Employment Benefit Plans

The Bank offers pension plans that have a defined benefit component and a defined contribution component. The Bank also offers other post-employment benefit plans to eligible employees. The defined benefit component of the pension plans provides benefits based on years of plan participation and average earnings at retirement. The other post-employment benefits include post-employment medical, dental, and life insurance coverage. Since September 19, 2022, the Bank has been offering a new defined contribution component that is available to all new employees upon hiring as well as to current participants of the defined benefit component. Therefore, as of that date, the defined benefit component is no longer offered to new employees. For the defined contribution component, the Bank's base contribution equals a percentage of annual salary and the Bank's additional contribution varies according to the employee's contributions, and the sum of the employee's age and years of continuous service. The defined benefit component of the pension plans is funded, whereas the defined contribution component and the other post-employment benefit plans are not funded. The fair value of the defined benefit component and the present value of the defined benefit obligations were measured as at October 31.

The Bank's most significant pension plan is the Employee Pension Plan of the National Bank of Canada; it is registered with OSFI and the Canada Revenue Agency and subject to the Pension Benefits Standards Act, 1985 and the Income Tax Act.

The defined benefit component of the pension plans and the other post-employment benefit plans exposes the Bank to specific risks such as investment performance, changes to the discount rate used to calculate the obligation, the longevity of plan participants, and future inflation. While management believes that the assumptions used in the actuarial valuation process are reasonable, there remains a degree of risk and uncertainty that may cause future results to differ significantly from these assumptions, which could give rise to gains or losses.

According to the Bank's governance rules, the policies and risk management related to the defined benefit component of the pension plans are overseen at different levels by the pension committees, the Bank's management, and the Board's Human Resources Committee. The defined benefit component of the pension plans are examined on an ongoing basis in order to monitor the funding and investment policies, the financial status of the plans, and the Bank's funding requirements.

The Bank's funding policy for the defined benefit component of the pension plans is to make at least the minimum annual contributions required by pension regulators.

For funded plans, the Bank determines whether an economic benefit exists in the form of potential reductions in future contributions and in the form of refunds from the plan surplus, where permitted by applicable regulations and plan provisions.

Defined Benefit Obligation, Assets of the Plans, and Funded Status

As at October 31
				Pension plans - Defined benefit component				Other post-employment benefit plans
				2023		2022		2023		2022
Defined benefit obligation
Balance at beginning				3,971		4,745		111		143
	Current service cost			92		129		−		1
	Interest cost			218		171		6		5
	Remeasurements
		Actuarial (gains) losses arising from changes in demographic assumptions		(40)		55		1		1
		Actuarial (gains) losses arising from changes in financial assumptions		(163)		(1,063)		(3)		(24)
		Actuarial (gains) losses arising from experience adjustments		71		95		(12)		(6)
	Employee contributions			72		65
	Benefits paid			(201)		(226)		(9)		(9)
Balance at end				4,020		3,971		94		111
Plan assets
Fair value at beginning				4,469		5,436
	Interest income			242		191
	Administration cost			(3)		(3)
	Remeasurements
		Return on plan assets (excluding interest income)		(329)		(1,113)
	Bank contributions(1)			126		119
	Employee contributions			72		65
	Benefits paid			(201)		(226)
Fair value at end				4,376		4,469
Defined benefit asset (liability) at end				356		498		(94)		(111)

(1)    For fiscal 2024, the Bank expects to pay an employer contribution of $122 million to the defined benefit component of the pension plans.

Defined Benefit Asset (Liability)

As at October 31
			Pension plans - Defined benefit component				Other post-employment benefit plans
			2023		2022		2023		2022
Defined benefit asset included in Other assets			356		498
Defined benefit liability included in Other liabilities			−		−		(94)		(111)
			356		498		(94)		(111)

Cost for Pension Plans and Other Post-Employment Benefit Plans

Year ended October 31
			Pension plans				Other post-employment benefit plans
			2023		2022		2023		2022
Current service cost			92		129		−		1
Interest expense (income), net			(24)		(20)		6		5
Administration costs			3		3
Expense of the defined benefit component			71		112		6		6
Expense of the defined contribution component			11						−
Expense recognized in Net income			82		112		6		6
Remeasurements(1)
	Actuarial (gains) losses on the defined benefit obligation		(132)		(913)		(14)		(29)
	Return on plan assets(2)		329		1,113
Remeasurements recognized in Other comprehensive income			197		200		(14)		(29)
			279		312		(8)		(23)

(1)    Changes related to the discount rate and to the return on plan assets are reviewed and updated on a quarterly basis. All other assumptions are updated annually.

(2)    Excludes interest income.

Allocation of the Fair Value of the Assets of the Defined Benefit Component of the Pensions Plans

As at October 31				2023						2022
				Quoted in an active market(1)		Not quoted in an active market		Total		Quoted in an active market(1)		Not quoted in an active market		Total
Asset classes
	Cash and cash equivalents			−		378		378		−		273		273
	Equity securities			841		1,300		2,141		988		1,150		2,138
	Debt securities
		Canadian government(2)		(237)		−		(237)		114		−		114
		Canadian provincial and municipal governments		−		2,128		2,128		−		1,769		1,769
		Other issuers		−		171		171		−		264		264
	Other			−		(205)		(205)		−		(89)		(89)
				604		3,772		4,376		1,102		3,367		4,469

(1)    Unadjusted quoted prices in active markets for identical assets that the Bank can access at the measurement date.

(2)    Includes obligations related to securities sold short.

The Bank's investment strategy for plan assets considers several factors, including the time horizon of pension plan obligations and investment risk. For each plan, an allocation range per asset class is defined using a mix of equity and debt securities to optimize the risk-return profile of plan assets and minimize asset/liability mismatching.

The assets of the pension plans may include investment securities issued by the Bank. As at October 31, 2023 and 2022, the assets of the pension plans do not include any securities issued by the Bank.

For fiscal 2023, the Bank and its related entities received $20 million ($21 million in fiscal 2022) in fees from the pension plans for related management, administration, and custodial services.

Note 23 - Employee Benefits - Pension Plans and Other Post-Employment Benefit Plans (cont.)

Allocation of the Defined Benefit Obligation by the Status of the Participants in the Defined Benefit Component of the Pension Plans

As at October 31
			Pension plans - Defined benefit component						Other post-employment benefit plans
			2023			2022			2023			2022
Active employees			41	%		41	%		3	%		7	%
Retirees			54	%		53	%		97	%		93	%
Participants with deferred vested benefits			5	%		6	%
			100	%		100	%		100	%		100	%
Weighted average duration of the
	defined benefit obligation (in years)		14			14			10			10

Significant Actuarial Assumptions (Weighted Average)

Discount Rate

The discount rate assumption is based on an interest rate curve that represents the yields on corporate AA bonds. Short-term maturities are obtained using a curve based on observed data from corporate AA bonds. Long-term maturities are obtained using a curve based on actual data and extrapolated data.

To measure the obligation related to the defined benefit component of the pension plans and related to the other post-employment benefit plans, the vested benefits that the Bank expects to pay in each future period are discounted to the measurement date using the spot rate associated with each of the respective periods based on the yield curve derived using the above methodology. The sum of discounted benefit amounts represents the defined benefit obligation. An average discount rate that replicates this obligation is then computed.

To better reflect current service cost, a separate discount rate was determined to account for the timing of future benefit payments associated with the additional year of service to be earned by the plan's active participants. Since these benefits are, on average, being paid at a later date than the benefits already earned by participants as a whole (i.e., longer duration), this method results in the use of a generally higher discount rate for calculating current service cost than that used to measure obligations where the yield curve is positively sloped. The methodology used to determine this discount rate is the same as the one used to establish the discount rate for measuring the obligation.

Other Assumptions

For measurement purposes, the estimated annual growth rate for health care costs was 4.94% as at October 31, 2023 (4.77% as at October 31, 2022). Based on the assumption retained, this rate is expected to decrease gradually to 3.57% in 2040 and remain steady thereafter.

Mortality assumptions are a determining factor when measuring the defined benefit obligation. Determining the expected benefit payout period is based on best estimate assumptions regarding mortality. Mortality tables are reviewed at least once a year, and the assumptions made are in accordance with accepted actuarial practice. New results regarding the plans are reviewed and used in calculating best estimates of future mortality.

As at October 31
					Pension plans - Defined benefit component						Other post-employment benefit plans
					2023			2022			2023			2022
Defined benefit obligation
	Discount rate				5.65	%		5.45	%		5.65	%		5.45	%
	Rate of compensation increase				4.00	%		3.00	%		2.00	%		3.00	%
	Health care cost trend rate										4.94	%		4.77	%
	Life expectancy (in years)  at 65 for a participant currently at
		Age 65
			Men		22.4			22.4			22.4			22.4
			Women		24.8			24.7			24.8			24.7
		Age 45
			Men		23.4			23.4			23.4			23.4
			Women		25.7			25.6			25.7			25.6
Year ended October 31
					Pension plans - Defined benefit component						Other post-employment benefit plans
					2023			2022			2023			2022
Pension plan expense
	Discount rate - Current service				5.45	%		3.70	%		5.45	%		3.70	%
	Discount rate - Interest expense (income), net				5.45	%		3.55	%		5.45	%		3.55	%
	Rate of compensation increase				4.00	%		3.00	%		2.00	%		3.00	%
	Health care cost trend rate										4.77	%		4.52	%
	Life expectancy (in years) at 65 for a participant currently at
		Age 65
			Men		22.4			21.4			22.4			21.4
			Women		24.7			23.7			24.7			23.7
		Age 45
			Men		23.4			22.4			23.4			22.4
			Women		25.6			24.7			25.6			24.7

Sensitivity of Significant Assumptions for 2023

The following table shows the potential impacts of changes to key assumptions on the defined benefit obligation of the pension plans and other post‑employment benefit plans as at October 31, 2023. These impacts are hypothetical and should be interpreted with caution, as changes in each significant assumption may not be linear.

As at October 31, 2023
		Pension plans - Defined benefit component		Other post-employment benefit plans
		Change in the obligation		Change in the obligation
Impact of a 1.00% increase in the discount rate		(509)		(3)
Impact of a 1.00% decrease in the discount rate		642		3
Impact of a 0.25% increase in the rate of compensation increase		26
Impact of a 0.25% decrease in the rate of compensation increase		(25)
Impact of a 1.00% increase in the health care cost trend rate				4
Impact of a 1.00% decrease in the health care cost trend rate				(3)
Impact of an increase in the age of participants by one year		(81)		(1)
Impact of a decrease in the age of participants by one year		78		1

Projected Benefit Payments

Year ended October 31
		Pension plans - Defined benefit component		Other post-employment benefit plans
2024		209		10
2025		217		9
2026		226		9
2027		233		8
2028		239		8
2029 to 2033		1,310		41

Note 24 - Income Taxes  

The Bank's income tax expense reported in the consolidated financial statements is as follows.

Year ended October 31			2023		2022
Consolidated Statement of Income
Current taxes
	Current year		776		803
	Canada Recovery Dividend(1)		32
	Change in income tax rate(1)		10
	Prior period adjustments		48		(19)
			866		784
Deferred taxes
	Origination and reversal of temporary differences		(148)		110
	Change in income tax rate(1)		(18)
	Prior period adjustments		(63)		−
			(229)		110
			637		894
Consolidated Statement of Changes in Equity
	Share issuance expenses, other equity instruments and other		(23)		(14)
Consolidated Statement of Comprehensive Income
	Remeasurements of pension plans and other post-employment benefit plans		(43)		(45)
	Net change in cash flow hedges		44		3
	Net fair value change attributable to credit risk on financial liabilities designated at fair value through profit or loss		(63)		216
	Other		(9)		(90)
			(71)		84
Income taxes			543		964

The breakdown of the income tax expense is as follows.

Year ended October 31		2023		2022
Current taxes		774		933
Deferred taxes		(231)		31
		543		964

(1)    During the year ended October 31, 2023, the Bank recorded a $32 million tax expense with respect to the Canada Recovery Dividend, i.e., a one-time, 15% tax on the fiscal 2021 and 2020 average taxable income above $1 billion, as well as an $8 million tax recovery related to the 1.5% increase in the statutory tax rate, which includes the impact related to current and deferred taxes for fiscal 2022.

The temporary differences and tax loss carryforwards resulting in deferred tax assets and liabilities are as follows. 

			As at October 31				Year ended October 31				Year ended October 31
			Consolidated Balance Sheet				Consolidated Statement of Income				Consolidated Statement of Comprehensive Income
			2023		2022		2023		2022		2023		2022
Deferred tax assets
Allowances for credit losses			314		235		79		10		−		−
Deferred charges			362		317		45		(37)		−		−
Defined benefit liability - Other post-employment
	benefit plans		36		38		2		(1)		(4)		(8)
Investments in associates			−		23		(23)		(34)		−		−
Leases liabilities			108		118		(10)		(14)		−		−
Deferred revenue			91		62		29		11		−		−
Tax loss carryforwards			50		35		15		2		−		−
Other items(1)			31		32		(1)		1		−		−
			992		860		136		(62)		(4)		(8)
Deferred tax liabilities
Premises and equipment and intangible assets			(225)		(312)		87		(13)		−		−
Defined benefit asset - Pension plans			(89)		(127)		(3)		(2)		41		53
Investments in associates			(12)		(2)		(2)		(2)		(8)		−
Other items			(60)		(44)		11		(31)		(27)		32
			(386)		(485)		93		(48)		6		85
Net deferred tax assets (liabilities)			606		375		229		(110)		2		77

(1)    As at October 31, 2023, the Consolidated Balance Sheet included a negligible amount of deferred tax asset related to share issuance costs ($2 million as at October 31, 2022) reported in Retained earnings on the Consolidated Statement of Changes in Equity.

Net deferred tax assets are included in Other assets and net deferred tax liabilities are included in Other liabilities.

As at October 31		2023		2022
Deferred tax assets		634		389
Deferred tax liabilities		(28)		(14)
		606		375

According to forecasts, which are based on information available as at October 31, 2023, the Bank believes that the results of future operations will likely generate sufficient taxable income to utilize all the deferred tax assets before they expire.

As at October 31, 2023, the total amount of temporary differences, unused tax loss carryforwards, and unused tax credits for which no deferred tax asset has been recognized was $536 million ($561 million as at October 31, 2022).

As at October 31, 2023, the total amount of temporary differences related to investments in subsidiaries, associates, and joint ventures for which no deferred tax liability has been recognized was $5,762 million ($5,636 million as at October 31, 2022).

Note 24 - Income Taxes (cont.)

The following table provides a reconciliation of the Bank's income tax rate.

Year ended October 31				2023				2022
				$		%		$		%
Income before income taxes				3,972		100.0		4,277		100.0
Income taxes at Canadian statutory income tax rate				1,112		28.0		1,133		26.5
Reduction in income tax rate due to
	Tax-exempt income from securities			(310)		(7.8)		(191)		(4.5)
	Non-taxable portion of capital gains			(1)		−		(1)		−
	Impact of enacted tax measures(1)			24		0.6
	Tax rates of subsidiaries, foreign entities and associates			(178)		(4.5)		(71)		(1.7)
	Other items			(10)		(0.3)		24		0.6
				(475)		(12.0)		(239)		(5.6)
Income taxes reported in the Consolidated Statement of Income and
	effective income tax rate			637		16.0		894		20.9

(1)    During the year ended October 31, 2023, the Bank recorded a $32 million tax expense with respect to the Canada Recovery Dividend, i.e., a one-time, 15% tax on the fiscal 2021 and 2020 average taxable income above $1 billion, as well as an $8 million tax recovery related to the 1.5% increase in the statutory tax rate, which includes the impact related to current and deferred taxes for fiscal 2022.

Notice of Assessment

In March 2023, the Bank was reassessed by the Canada Revenue Agency (CRA) for additional income tax and interest of approximately $90 million (including estimated provincial tax and interest) in respect of certain Canadian dividends received by the Bank during the 2018 taxation year. 

In prior fiscal years, the Bank had been reassessed for additional income tax and interest of approximately $875 million (including provincial tax and interest) in respect of certain Canadian dividends received by the Bank during the 2012-2017 taxation years. 

In the reassessments, the CRA alleges that the dividends were received as part of a "dividend rental arrangement".

In October 2023, the Bank filed a notice of appeal with the Tax Court of Canada, and the matter is now in litigation. The CRA may issue reassessments to the Bank for taxation years subsequent to 2018 in regard to certain activities similar to those that were the subject of the above-mentioned reassessments. The Bank remains confident that its tax position was appropriate and intends to vigorously defend its position. As a result, no amount has been recognized in the consolidated financial statements as at October 31, 2023.

Canadian Government's 2022 Tax Measures

On November 4, 2022, the Government of Canada introduced Bill C-32 - An Act to implement certain provisions of the fall economic statement tabled in Parliament on November 3, 2022 and certain provisions of the budget tabled in Parliament on April 7, 2022 to implement tax measures applicable to certain entities of banking and life insurer groups, as presented in its April 7, 2022 budget. These tax measures include the Canada Recovery Dividend (CRD), which is a one-time, 15% tax on the fiscal 2021 and 2020 average taxable income above $1 billion, as well as a 1.5% increase in the statutory tax rate. On December 15, 2022, Bill C-32 received royal assent. Given that these tax measures were in effect at the financial reporting date, a $32 million tax expense for the CRD and an $8 million tax recovery for the tax rate increase, including the impact related to current and deferred taxes for fiscal 2022, were recognized in the consolidated financial statements for the year ended October 31, 2023.

Proposed Legislation

On November 28, 2023, the Government of Canada released draft legislation entitled An Act to implement certain provisions of the fall economic statement tabled in Parliament on November 21, 2023 and certain provisions of the budget tabled in Parliament on March 28, 2023 to implement tax measures applicable to the Bank. The measures include the denial of the deduction in respect of dividends received after 2023 on shares that are mark-to-market property for tax purposes (except for dividends received on "taxable preferred shares" as defined in the Income Tax Act), as well as the application of a 2% tax on the net value of equity repurchases occurring as of January 1, 2024.

In its March 28, 2023 budget, the Government of Canada also proposed to implement the Pillar 2 rules (global minimum tax) published by the Organisation for Economic Co-operation and Development (OECD) for fiscal years beginning as of December 31, 2023. To date, the Pillar 2 rules have not yet been included in a bill in Canada. During fiscal 2023, the Pillar 2 rules were included in a bill in certain jurisdictions where the Bank operates.

Note 25 - Earnings Per Share

Diluted earnings per share is calculated by dividing net income attributable to common shareholders by the weighted average number of common shares outstanding after taking into account the dilution effect of stock options using the treasury stock method and any gain (loss) on the redemption of preferred shares.

Year ended October 31			2023		2022
Basic earnings per share
Net income attributable to the Bank's shareholders and holders of other equity instruments			3,337		3,384
Dividends on preferred shares and distributions on other equity instruments			141		107
Net income attributable to common shareholders			3,196		3,277
Weighted average basic number of common shares outstanding (thousands)			337,660		337,099
Basic earnings per share (dollars)			9.47		9.72
Diluted earnings per share
Net income attributable to common shareholders			3,196		3,277
Weighted average basic number of common shares outstanding (thousands)			337,660		337,099
Adjustment to average number of common shares (thousands)
	Stock options(1)		3,108		3,738
Weighted average diluted number of common shares outstanding (thousands)			340,768		340,837
Diluted earnings per share (dollars)			9.38		9.61

(1)    For the year ended October 31, 2023, given that the exercise price of the options was lower than the average price of the Bank's common shares, no options were excluded from the diluted earnings per share calculation. For the year ended October 31, 2022, the calculation of diluted earnings per share excluded an average number of 1,575,093 options outstanding with a weighted average exercise price of $96.35, given that the exercise price of these options was greater than the average price of the Bank's common shares.

Note 26 - Guarantees, Commitments and Contingent Liabilities

Guarantees

The maximum potential amount of future payments represents the maximum risk of loss if there were a total default by the guaranteed parties, without consideration of recoveries under recourse provisions or insurance policies or from collateral held or pledged. The maximum potential amount of future payments under significant guarantees issued by the Bank is presented in the following table.

As at October 31		2023		2022
Letters of guarantee(1)		8,339		6,618
Backstop liquidity, credit enhancement facilities and other(1)		10,101		8,707
Securities lending		147		180

(1)    For additional information on allowances for credit losses related to off-balance-sheet commitments, see Note 7 to these consolidated financial statements.

Letters of Guarantee

In the normal course of business, the Bank issues letters of guarantee. These letters of guarantee represent irrevocable commitments that the Bank will make payments in the event that a client cannot meet its obligations to third parties. The Bank's policy for requiring collateral security with respect to letters of guarantee is similar to that for loans. Generally, the term of these letters of guarantee is less than two years.

Backstop Liquidity and Credit Enhancement Facilities

Facilities to Multi-Seller Conduits

The Bank administers multi-seller conduits that purchase financial assets from clients and finance those purchases by issuing asset-backed commercial paper. The Bank provides backstop liquidity facilities to these multi-seller conduits. As at October 31, 2023, the notional amount of the global-style backstop liquidity facilities totalled $4.6 billion ($3.2 billion as at October 31, 2022), representing the total amount of commercial paper outstanding.

These backstop liquidity facilities can be drawn if the conduits are unable to access the commercial paper market, even if there is no general market disruption. These facilities have terms of less than one year and can be periodically renewed. The terms and conditions of these backstop liquidity facilities do not require the Bank to advance money to the conduits if the conduits are insolvent or involved in bankruptcy proceedings or to fund non-performing assets beyond the amount of the available credit enhancements. The backstop liquidity facilities provided by the Bank have not been drawn to date.

Note 26 - Guarantees, Commitments and Contingent Liabilities (cont.)

The Bank also provides credit enhancement facilities to these multi-seller conduits. These facilities have terms of less than one year and are automatically renewable unless the Bank sends a non-renewal notice. As at October 31, 2023 and 2022, the committed notional value for these facilities was $30 million. To date, the credit enhancement facilities provided by the Bank have not been drawn.

The maximum risk of loss for the Bank cannot exceed the total amount of commercial paper outstanding, i.e., $4.6 billion as at October 31, 2023 ($3.2 billion as at October 31, 2022). As at October 31, 2023, the Bank held $67 million ($35 million as at October 31, 2022) of this commercial paper and, consequently, the maximum potential amount of future payments, taking into account the credit enhancement facilities, was $4.5 billion ($3.2 billion as at October 31, 2022).

CDCC Overnight Liquidity Facility

Canadian Derivatives Clearing Corporation (CDCC) acts as a central clearing counterparty for multiple financial instrument transactions in Canada. Certain fixed-income clearing members of CDCC have provided an equally shared committed and uncommitted global overnight liquidity facility for the purpose of supporting CDCC in its clearing activities of securities purchased under reverse repurchase agreements or sold under repurchase agreements. The objective of this facility is to maintain sufficient liquidity in the event of a clearing member's default. As a fixed-income clearing member providing support to CDCC, the Bank provided a liquidity facility. As at October 31, 2023, the notional amount of the overnight uncommitted liquidity facility amounted to $5.6 billion ($5.6 billion as at October 31, 2022). As at October 31, 2023 and 2022, no amount had been drawn.

Securities Lending

Under securities lending agreements that the Bank has entered into with certain clients who have entrusted it with the safekeeping of their securities, the Bank lends the securities to third parties and indemnifies its clients in the event of loss. To protect itself against any contingent loss, the Bank obtains, as security from the borrower, a cash amount or extremely liquid marketable securities with a fair value greater than that of the securities loaned. No amount has been recognized on the Consolidated Balance Sheet with respect to potential indemnities resulting from securities lending agreements.

Other Indemnification Agreements

In the normal course of business, including securitization transactions and discontinuances of businesses and operations, the Bank enters into numerous contractual agreements under which it undertakes to compensate the counterparty for costs incurred as a result of litigation, changes in laws and regulations (including tax legislation), claims with respect to past performance, incorrect representations or the non-performance of certain restrictive covenants. The Bank also undertakes to indemnify any person acting as a director or officer or performing a similar function within the Bank or one of its subsidiaries or another entity, at the request of the Bank, for all expenses incurred by that person in proceedings or investigations to which he or she is party in that capacity. Moreover, as a member of a securities transfer network and pursuant to the membership agreement and the regulations governing the operation of the network, the Bank granted collateral in favour of the Bank of Canada to guarantee any obligation of the Bank towards the Bank of Canada that could result from the Bank's participation in the securities transfer network. The durations of the indemnification agreements vary according to circumstance; as at October 31, 2023 and 2022, given the nature of the agreements, the Bank is unable to make a reasonable estimate of the maximum potential liability it could be required to pay to counterparties. No amount related to these agreements has been recognized on the Consolidated Balance Sheet.

Commitments

Credit Instruments

In the normal course of business, the Bank enters into various off-balance-sheet commitments. The credit instruments used to meet the financing needs of its clients represent the maximum amount of additional credit that the Bank could be obligated to extend if the commitments were fully drawn.

As at October 31		2023		2022
Letters of guarantee(1)		8,339		6,618
Documentary letters of credit(2)		157		161
Credit card receivables(3)		9,802		9,337
Commitments to extend credit(3)		90,706		82,117

(1)    See the Letters of Guarantee item on the previous page.

(2)    Documentary letters of credit are documents issued by the Bank and used in international trade to enable a third party to present a payment request to the Bank for up to an amount established under specific terms and conditions; these instruments are collateralized by the delivery of the goods to which they are related.

(3)    Credit card receivables and commitments to extend credit represent unused portions of authorizations to extend credit, under certain conditions, in the form of loans or bankers' acceptances.

Financial Assets Received as Collateral

As at October 31, 2023, the fair value of financial assets received as collateral that the Bank was authorized to sell or repledge was $87.9 billion ($92.3 billion as at October 31, 2022). These financial assets received as collateral consist of securities related to securities financing and derivative transactions as well as securities purchased under reverse repurchase agreements and securities borrowed.

Other Commitments

The Bank acts as an investor in investment banking activities whereby it enters into agreements to finance external private equity funds and investments in equity and debt securities at market value at the time the agreements are signed. In connection with these activities, the Bank had commitments to invest up to $127 million as at October 31, 2023 ($102 million as at October 31, 2022). In addition, through one of its subsidiaries, the Bank purchases retail loans originated by other financial institutions at market value at the time of purchase. As at October 31, 2023, the Bank had commitments to purchase loans of a negligible amount ($60 million as at October 31, 2022).

Pledged Assets

In the normal course of business, the Bank pledges securities and other assets as collateral. A breakdown of encumbered assets pledged as collateral is provided in the following table. These transactions are concluded in accordance with standard terms and conditions.

As at October 31			2023		2022
Assets pledged to
	Bank of Canada		300		325
	Direct clearing organizations(1)		3,046		1,634
Assets pledged in relation to
	Derivative financial instrument transactions		6,628		5,368
	Borrowing, securities lending and securities sold under reverse repurchase agreements		85,673		68,458
	Securitization transactions		25,088		26,361
	Covered bonds(2)		12,120		11,590
	Other		752		159
Total			133,607		113,895

(1)    Includes assets pledged as collateral for activities in the systemically important payment system (designated as Lynx) as at October 31, 2023 and 2022.

(2)    The Bank has a covered bond program. For additional information, see Notes 13 and 27 to these consolidated financial statements.

Contingent Liabilities

Litigation 

In the normal course of business, the Bank and its subsidiaries are involved in various claims relating, among other matters, to loan portfolios, investment portfolios, and supplier agreements, including court proceedings, investigations or claims of a regulatory nature, class actions, or other legal remedies of varied natures.

More specifically, the Bank is involved as a defendant in class actions instituted by consumers contesting, inter alia, certain transaction fees or who wish to avail themselves of certain legislative provisions relating to consumer protection. The recent developments in the main legal proceeding involving the Bank are as follows:

Defrance

On January 21, 2019, the Quebec Superior Court authorized a class action against the National Bank and several other Canadian financial institutions. The originating application was served to the Bank on April 23, 2019. The class action was initiated on behalf of consumers residing in Quebec. The plaintiffs allege that non-sufficient funds charges, billed by all of the defendants when a payment order is refused due to non-sufficient funds, are illegal and prohibited by the Consumer Protection Act. The plaintiffs are claiming, in the form of damages, the repayment of these charges as well as punitive damages.

It is impossible to determine the outcome of the claims instituted or which may be instituted against the Bank and its subsidiaries. The Bank estimates, based on the information at its disposal, that while the amount of contingent liabilities pertaining to these claims, taken individually or in the aggregate, could have a material impact on the Bank's consolidated results of operations for a particular period, it would not have a material adverse impact on the Bank's consolidated financial position.

Note 27 - Structured Entities

A structured entity is an entity created to accomplish a narrow and well-defined objective and is designed so that voting or similar rights are not the dominant factor in deciding who controls the entity, such as when any voting rights relate solely to administrative tasks and the relevant activities are directed by means of contractual arrangements. Structured entities are assessed for consolidation in accordance with the accounting treatment described in Note 1 to these consolidated financial statements. The Bank's maximum exposure to loss resulting from its interests in these structured entities consists primarily of the investments in these entities, the fair value of derivative financial instrument contracts entered into with them, and the backstop liquidity and credit enhancement facilities granted to certain structured entities.

In the normal course of business, the Bank may enter into financing transactions with third-party structured entities, including commercial loans, reverse repurchase agreements, prime brokerage margin lending, and similar collateralized lending transactions. While such transactions expose the Bank to the counterparty credit risk of the structured entities, this exposure is mitigated by the collateral related to these transactions. The Bank typically has neither power nor significant variable returns resulting from financing transactions with structured entities and does not consolidate such entities. Financing transactions with third-party-sponsored structured entities are included in the Bank's consolidated financial statements and are not included in the table accompanying this note on the next page.

Non-Consolidated Structured Entities

Multi-Seller Conduits

The Bank administers multi-seller conduits that purchase financial assets from clients and finance those purchases by issuing commercial paper backed by the assets acquired. Clients use these multi-seller conduits to diversify their funding sources and reduce borrowing costs, while continuing to manage the financial assets and providing some amount of first-loss protection. Notes issued by the conduits and held by third parties provide additional credit loss protection. The Bank acts as a financial agent and provides these conduits with administrative and transaction structuring services as well as backstop liquidity and credit enhancement facilities under the commercial paper program. These facilities are presented and described in Note 26. The Bank has concluded derivative financial instrument contracts with these conduits, the fair value of which is presented on the Bank's Consolidated Balance Sheet. Although the Bank has the ability to direct the relevant activities of these conduits, it cannot use its power to affect the amount of the returns it obtains, as it acts as an agent. Consequently, the Bank does not control these conduits and does not consolidate them. 

Investment Funds

The Bank enters into derivative or other financial instrument contracts with third parties to provide them with the desired exposure to certain investment funds. The Bank economically hedges the risks related to these derivatives by investing in those investment funds. The Bank can also hold economic interests in certain investment funds as part of its investing activities. In addition, the Bank is sponsor and investment manager of mutual funds in which it has insignificant or no interest. The Bank does not control the funds where its holdings are not significant given that, in these circumstances, the Bank either acts only as an agent or does not have any power over the relevant activities. In both cases, it does not have significant exposure to the variable returns of the funds. Therefore, the Bank does not consolidate these funds.

Private Investments

The Bank invests in several limited liability partnerships and other incorporated entities. These investment companies in turn invest in operating companies with a view to reselling these investments at a profit over the medium or long term. The Bank does not intervene in the operations of these entities; its only role is that of an investor. Consequently, it does not control these companies and does not consolidate them. 

Third-Party Structured Entities

The Bank has invested in third-party structured entities, some of which are asset-backed. The underlying assets consist of residential mortgages, consumer loans, equipment loans, leases, and securities. The Bank does not have the ability to direct the relevant activities of these structured entities and has no exposure to their variable returns, other than the right to receive interest income and dividend income from its investments. Consequently, the Bank does not control these structured entities and does not consolidate them.

The following table presents the carrying amounts of the assets and liabilities relating to the Bank's interests in non-consolidated structured entities, the Bank's maximum exposure to loss from these interests, as well as the total assets of these structured entities. The structured entity Canada Housing Trust is not presented. For additional information, see Note 8 to these consolidated financial statements.

						As at October 31, 2023
				Multi-seller conduits(1)		Investment funds(2)		Private investments(3)		Third-party structured entities(4)
Assets on the Consolidated Balance Sheet
	Securities at fair value through profit or loss			67		1,042		92		−
	Securities at amortized cost			−		−		−		3,106
	Derivative financial instruments			−		−		−		341
				67		1,042		92		3,447
As at October 31, 2022				35		335		77		5,201
Liabilities on the Consolidated Balance Sheet
	Derivative financial instruments			(82)		−		−		(90)
				(82)		−		−		(90)
As at October 31, 2022				(71)		−		−		(91)
Maximum exposure to loss
	Securities			67		1,042		92		3,447
	Liquidity, credit enhancement facilities and commitments			4,549		−		−		469
				4,616		1,042		92		3,916
As at October 31, 2022				3,190		335		77		5,669
Total assets of the structured entities				4,587		2,583		651		11,390
As at October 31, 2022				3,183		1,772		535		11,197

(1)    The main underlying assets, located in Canada, are residential mortgages, automobile loans, automobile inventory financings, and other receivables. As at October 31, 2023, the notional committed amount of the global-style liquidity facilities totalled $4.6 billion ($3.2 billion as at October 31, 2022), representing the total amount of commercial paper outstanding. The Bank also provides series-wide credit enhancement facilities for a notional committed amount of $30 million ($30 million as at October 31, 2022). The maximum exposure to loss cannot exceed the amount of commercial paper outstanding. As at October 31, 2023, the Bank held $67 million in commercial paper ($35 million as at October 31, 2022) and, consequently, the maximum potential amount of future payments as at October 31, 2023 was limited to $4.5 billion ($3.2 billion as at October 31, 2022), which represents the undrawn liquidity and credit enhancement facilities.

(2)    The underlying assets are various financial instruments and are presented on a net asset basis. Certain investment funds are in a trading portfolio.

(3)    The underlying assets are private investments. The amount of total assets of the structured entities corresponds to the amount for the most recent available period.

(4)    The underlying assets are residential mortgages, consumer loans, equipment loans, leases, and securities.

Consolidated Structured Entities

Securitization Entity for the Bank's Credit Card Receivables

In April 2015, the Bank set up Canadian Credit Card Trust II (CCCT II) to continue its credit card securitization program on a revolving basis and to use the entity for capital management and funding purposes.

The Bank provides first-loss protection against the losses, since it retains the excess spread from the portfolio of sold receivables. The excess spread represents the residual net interest income after all the expenses related to this structure have been paid. The Bank also provides second-loss protection as it holds subordinated notes issued by CCCT II. In addition, the Bank acts as an administrative agent and servicer and as such is responsible for the daily administration and management of CCCT II's credit card receivables. The Bank therefore has the ability to direct the relevant activities of CCCT II and can exercise its power to affect the amount of returns it obtains. Consequently, the Bank controls CCCT II and consolidates it.

Multi-Seller Conduit

The Bank administers a multi-seller conduit that purchases various financial assets from clients and finances those purchases by issuing debt securities (including commercial paper) backed by the assets acquired. The clients use this multi-seller conduit to diversify their funding sources and reduce borrowing costs, while continuing to manage the financial assets and providing some amount of first-loss protection. The Bank holds the sole note issued by the conduit and has concluded a derivative financial instrument contract with the conduit. The Bank controls the relevant activities of this conduit through its involvement as a financial agent, agent for administrative and transaction structuring services as well as investor in the conduit's sole note. The Bank's functions and investment in the conduit confer to it decision-making power over the composition of assets acquired by the conduit and the selection of the seller as well as some exposure to the conduit's variable returns. Therefore, the Bank consolidates this conduit.

Note 27 - Structured Entities (cont.)

Investment Funds

The Bank enters into derivative or other financial instrument contracts with third parties to provide them with the desired exposure to certain investment funds. The Bank economically hedges the risks related to these derivatives by investing in those investment funds. The Bank can also hold economic interests in certain investment funds as part of its investing activities. The Bank controls the relevant activities of certain funds through its involvement as an investor and its significant exposure to their variable returns. Therefore, the Bank consolidates these funds.

Covered Bonds

NBC Covered Bond Guarantor (Legislative) Limited Partnership

In December 2013, the Bank established the covered bond legislative program under which covered bonds are issued. It therefore created NBC Covered Bond Guarantor (Legislative) Limited Partnership (the Guarantor) to guarantee payment of the principal and interest owed to the bondholders. The Bank sold uninsured residential mortgages to the Guarantor and granted it loans to facilitate the acquisition of these assets. The Bank acts as manager of the partnership and has decision-making authority over its relevant activities in accordance with the contractual terms governing the covered bond legislative program. In addition, the Bank is able, in accordance with the contractual terms governing the covered bond legislative program, to affect the variable returns of the partnership, which are directly related to the return on the mortgage loan portfolio and the interest on the loans from the Bank. Consequently, the Bank controls the partnership and consolidates it.

Third-Party Structured Entities

In 2018, the Bank, through one of its subsidiaries, provided financing to a third-party structured entity in exchange for a 100% interest in a loan portfolio, the sole asset held by that entity. The Bank controls and therefore consolidates the structured entity, as it has the ability to direct the entity's relevant activities through its involvement in the decision-making process. The Bank is also exposed to the entity's variable returns.

The following table presents the Bank's investments and other assets in the consolidated structured entities as well as the total assets of these entities.

As at October 31			2023				2022
			Investments and other assets		Total assets(1)		Investments and other assets		Total assets(1)
Consolidated structured entities
Securitization entity for the Bank's credit card receivables(2)(3)			2,176		2,272		1,916		2,073
Multiseller conduit(4)			1,655		1,655		802		802
Investment funds(5)			26		26		56		56
Covered bonds(6)			20,458		20,869		17,900		18,237
Third-party structured entities(7)			147		147		166		166
			24,462		24,969		20,840		21,334

(1)    There are restrictions, arising essentially from regulatory requirements, corporate or securities laws, and contractual arrangements, that limit the ability of some of the Bank's consolidated structured entities to transfer funds to the Bank.

(2)    The underlying assets are credit card receivables.

(3)    The Bank's investment is presented net of third-party holdings.

(4)    The underlying assets, located in Canada, are mainly residential mortgages.

(5)    The underlying assets are various financial instruments and are presented on a net asset basis. Certain investment funds are in a trading portfolio.

(6)    The underlying assets are uninsured residential mortgage loans of the Bank. The average maturity of these underlying assets is two years. As at October 31, 2023, the total amount of transferred mortgage loans was $20.6 billion ($17.9 billion as at October 31, 2022), and the total amount of covered bonds of $10.9 billion was recognized in Deposits on the Consolidated Balance Sheet ($10.4 billion as at October 31, 2022). For additional information, see Note 13 to these consolidated financial statements.

(7)    The underlying assets consist of a loan portfolio.

Note 28 - Related Party Disclosures

In the normal course of business, the Bank provides various banking services to related parties and enters into contractual agreements and other operations with related parties. The Bank considers the following to be related parties:

·     its key officers and directors and members of their immediate family, i.e., spouses and children under 18 living in the same household;

·     entities over which its key officers and directors and their immediate family have control or significant influence through their significant voting power;

·     the Bank's associates and joint ventures;

·     the Bank's pension plans (for additional information, see Note 23 to these consolidated financial statements).

According to the established definition, the Bank's key officers are those persons having authority and responsibility for planning, directing, and controlling the Bank's activities, directly or indirectly.

Related Party Transactions

As at October 31
		Key officers and directors(1)					Related entities
			2023		2022		2023			2022
Assets
	Mortgage loans and other loans		24		22		223	(2)		449	(2)
Liabilities
	Deposits		45		58		230	(3)		80	(3)
	Other		−		−		3			6

(1)    As at October 31, 2023, key officers and directors and their immediate family members were holding $28 million of the Bank's common and preferred shares ($68 million as at October 31, 2022).

(2)    As at October 31, 2023, mortgage loans and other loans consisted of: (i) $7 million in loans to the Bank's associates ($1 million as at October 31, 2022) and (ii) $216 million in loans to entities over which the Bank's key officers or directors or their immediate family members exercise control or significant influence through significant voting power ($448 million as at October 31, 2022).

(3)    As at October 31, 2023, deposits consisted of: (i) $1 million in deposits to the Bank's associates (nil as at October 31, 2022) and (ii) $229 million in deposits from entities over which the Bank's key officers or directors and their immediate family members exercise control or significant influence through significant voting power ($80 million as at October 31, 2022).

The contractual agreements and other transactions with related entities as well as with directors and key officers are entered into under conditions similar to those offered to non-related third parties. These agreements did not have a significant impact on the Bank's results. The Bank also offers a deferred stock unit plan to directors who are not Bank employees. For additional information, see Notes 9, 22 and 27 to these consolidated financial statements.

Compensation of Key Officers and Directors

Year ended October 31		2023		2022
Compensation and other short-term and long-term benefits		24		24
Share-based payments		26		21

Note 28 - Related Party Disclosures (cont.)

Principal Subsidiaries of the Bank⁽¹⁾

As at October 31, 2023

Name

Business activity

Principal office address

Voting shares(2)

Investment at cost

Canada and United States

National Bank Acquisition Holding Inc.

Holding company

Montreal, Canada

100%

1,785

National Bank Financial Inc.

Investment dealer

Montreal, Canada

100%

NBF International Holdings Inc.

Holding company

Montreal, Canada

100%

National Bank of Canada Financial Group Inc.

Holding company

New York, NY, United States

100%

Credigy Ltd.

Holding company

Atlanta, GA, United States

100%

National Bank of Canada Financial Inc.

Investment dealer

New York, NY, United States

100%

National Bank Investments Inc.

Mutual funds dealer

Montreal, Canada

100%

441

National Bank Life Insurance Company

Insurance

Montreal, Canada

100%

Natcan Trust Company

Trustee

Montreal, Canada

100%

238

National Bank Trust Inc.

Trustee

Montreal, Canada

100%

195

National Bank Realty Inc.

Real estate

Montreal, Canada

100%

80

NatBC Holding Corporation

Holding company

Hollywood, FL, United States

100%

44

Natbank, National Association

Commercial bank

Hollywood, FL, United States

100%

Flinks Technology Inc.

Information technology

Montreal, Canada

86%

144

Other countries

Natcan Global Holdings Ltd.

Holding company

Sliema, Malta

100%

22

NBC Global Finance Limited

Investment services

Dublin, Ireland

100%

NBC Financial Markets Asia Limited

Investment dealer

Hong Kong, China

100%

5

Advanced Bank of Asia Limited

Commercial bank

Phnom Penh, Cambodia

100%

941

ATA IT Ltd.

Information technology

Bangkok, Thailand

100%

3

(1)    Excludes consolidated structured entities. For additional information, see Note 27 to these consolidated financial statements.

(2)    The Bank's percentage of voting rights in these subsidiaries.

Note 29 - Management of the Risks Associated With Financial Instruments

The Bank is exposed to credit risk, market risk, and liquidity and funding risk. The Bank's objectives, policies, and procedures for managing risk and the risk measurement methods are presented in the Risk Management section of the MD&A for the year ended October 31, 2023. Text in grey shading and tables identified with an asterisk (*) in the Risk Management section of the MD&A for the year ended October 31, 2023 are integral parts of these consolidated financial statements.

Residual Contractual Maturities of Balance Sheet Items and Off-Balance-Sheet Commitments

The following tables present balance sheet items and off-balance-sheet commitments by residual contractual maturity as at October 31, 2023 and 2022. The information gathered from this maturity analysis is a component of liquidity and funding management. However, this maturity profile does not represent how the Bank manages its interest rate risk nor its liquidity risk and funding needs. The Bank considers factors other than contractual maturity when assessing liquid assets or determining expected future cash flows.

In the normal course of business, the Bank enters into various off-balance-sheet commitments. The credit instruments used to meet the funding needs of its clients represent the maximum amount of additional credit that the Bank could be obligated to extend if the commitments were fully drawn.

The Bank also has future minimum commitments under leases for premises as well as under other contracts, mainly commitments to purchase loans and contracts for outsourced information technology services. Most of the lease commitments are related to operating leases.

																	As at October 31, 2023
					1 month or less		Over 1 month to 3 months		Over 3 months to 6 months		Over 6 months to 9 months		Over 9 months to 12 months		Over 1 year to 2 years		Over 2 years to 5 years		Over 5 years		No specified maturity		Total
Assets
Cash and deposits
	with financial institutions				25,374		448		354		50		216		−		−		−		8,792		35,234
Securities
	At fair value through
		profit or loss			694		258		1,663		1,758		2,260		3,667		10,823		12,813		66,058		99,994
	At fair value through
		other comprehensive income			3		30		154		224		426		538		4,548		2,660		659		9,242
	At amortized cost				4		158		508		338		1,399		4,110		4,713		1,352		−		12,582
					701		446		2,325		2,320		4,085		8,315		20,084		16,825		66,717		121,818
Securities purchased under
	reverse repurchase
	agreements and
	securities borrowed				2,275		1,641		716		72		416		693		−		−		5,447		11,260
Loans(1)
	Residential mortgage				1,409		1,250		1,990		3,126		2,990		15,339		51,112		9,089		542		86,847
	Personal				613		637		1,060		1,271		1,396		6,258		15,656		5,713		13,754		46,358
	Credit card																				2,603		2,603
	Business and government				21,406		4,262		4,007		3,204		2,783		6,695		11,322		5,414		25,099		84,192
	Customers' liability under
		acceptances			6,191		373		50		13		−		−		−		−		−		6,627
	Allowances for credit losses																				(1,184)		(1,184)
					29,619		6,522		7,107		7,614		7,169		28,292		78,090		20,216		40,814		225,443
Other
	Derivative financial instruments				2,040		1,982		1,367		1,197		611		1,696		2,399		6,224		−		17,516
	Investments in associates and
		joint ventures																			49		49
	Premises and equipment																				1,592		1,592
	Goodwill																				1,521		1,521
	Intangible assets																				1,256		1,256
	Other assets(1)				2,639		746		166		1,206		546		597		249		659		1,081		7,889
					4,679		2,728		1,533		2,403		1,157		2,293		2,648		6,883		5,499		29,823
					62,648		11,785		12,035		12,459		13,043		39,593		100,822		43,924		127,269		423,578

(1)    Amounts collectible on demand are considered to have no specified maturity.

Note 29 - Management of the Risks Associated With Financial Instruments (cont.)

																	As at October 31, 2023
					1 month or less		Over 1 month to 3 months		Over 3 months to 6 months		Over 6 months to 9 months		Over 9 months to 12 months		Over 1 year to 2 years		Over 2 years to 5 years		Over 5 years		No specified maturity		Total
Liabilities and equity
Deposits(1)(2)
	Personal				4,648		3,722		4,491		6,056		5,145		8,398		11,635		4,164		39,624		87,883
	Business and government				32,642		10,044		17,495		4,271		3,498		9,127		15,768		5,058		99,425		197,328
	Deposit-taking institutions				646		408		32		109		18		8		15		33		1,693		2,962
					37,936		14,174		22,018		10,436		8,661		17,533		27,418		9,255		140,742		288,173
Other
	Acceptances				6,191		373		50		13		−		−		−		−		−		6,627
	Obligations related
		to securities sold short(3)			35		155		129		73		76		347		2,332		4,123		6,390		13,660
	Obligations related to
		securities sold under
		repurchase agreements and
		securities loaned			23,041		2,719		1,040		3,467		−		274		−		−		7,806		38,347
	Derivative financial instruments				1,912		2,697		1,186		1,086		467		2,415		3,068		7,057		−		19,888
	Liabilities related to transferred
		receivables(4)			−		1,760		829		2,142		618		3,915		8,678		7,092		−		25,034
	Securitization - Credit card(5)				−		−		−		−		−		48		−		−		−		48
	Lease liabilities(5)				9		28		25		24		23		83		197		128		−		517
	Other liabilities - Other items(1)(5)				1,417		309		174		7		27		37		58		105		4,724		6,858
					32,605		8,041		3,433		6,812		1,211		7,119		14,333		18,505		18,920		110,979
Subordinated debt					−		−		−		−		−		−		−		748		−		748
Equity																					23,678		23,678
					70,541		22,215		25,451		17,248		9,872		24,652		41,751		28,508		183,340		423,578
Off-balance-sheet commitments
	Letters of guarantee and
		documentary letters of credit			89		1,287		1,975		2,185		1,490		1,165		255		50		−		8,496
	Credit card receivables(6)																				9,802		9,802
	Backstop liquidity and credit
		enhancement facilities(7)			−		15		5,552		15		−		−		−		−		4,519		10,101
	Commitments to extend credit(8)				3,186		10,675		8,445		7,562		4,316		4,579		3,312		39		48,592		90,706
	Obligations related to:
		Lease commitments(9)			1		1		1		2		2		6		7		1		−		21
		Other contracts(10)			11		22		34		33		36		46		138		13		127		460

(1)    Amounts payable upon demand or notice are considered to have no specified maturity.

(2)    The Deposits item is presented in greater detail than it is on the Consolidated Balance Sheet.

(3)    Amounts are disclosed according to the residual contractual maturity of the underlying security.

(4)    These amounts mainly include liabilities related to the securitization of mortgage loans.

(5)    The Other liabilities item is presented in greater detail than it is on the Consolidated Balance Sheet.

(6)    These amounts are unconditionally revocable at the Bank's discretion at any time.

(7)    In the event of payment on one of the backstop liquidity facilities, the Bank will receive as collateral government bonds in an amount up to $5.6 billion.

(8)    These amounts include $46.7 billion that is unconditionally revocable at the Bank's discretion at any time.

(9)    These amounts include leases for which the underlying asset is of low value and leases other than for real estate of less than one year.

(10)   These amounts include $0.1 billion in contractual commitments related to the portion of the head office building under construction.

																	As at October 31, 2022
					1 month or less		Over 1 month to 3 months		Over 3 months to 6 months		Over 6 months to 9 months		Over 9 months to 12 months		Over 1 year to 2 years		Over 2 years to 5 years		Over 5 years		No specified maturity		Total
Assets
Cash and deposits
	with financial institutions				23,141		142		311		18		685		−		−		−		7,573		31,870
Securities
	At fair value through
		profit or loss			1,527		6,450		5,405		2,267		2,337		3,369		8,634		10,661		46,725		87,375
	At fair value through
		other comprehensive income			5		30		13		20		46		952		4,910		2,296		556		8,828
	At amortized cost				602		196		1,876		1,032		95		2,840		5,802		1,073		−		13,516
					2,134		6,676		7,294		3,319		2,478		7,161		19,346		14,030		47,281		109,719
Securities purchased under
	reverse repurchase
	agreements and
	securities borrowed				12,489		1,231		890		−		409		1,044		−		−		10,423		26,486
Loans(1)
	Residential mortgage				1,155		1,124		1,899		2,716		2,364		8,910		53,335		8,059		567		80,129
	Personal				423		449		878		1,208		1,036		3,701		17,792		5,085		14,751		45,323
	Credit card																				2,389		2,389
	Business and government				19,980		3,491		3,971		3,586		2,604		6,167		11,452		2,985		19,081		73,317
	Customers' liability under
		acceptances			5,967		554		20		−		−		−		−		−		−		6,541
	Allowances for credit losses																				(955)		(955)
					27,525		5,618		6,768		7,510		6,004		18,778		82,579		16,129		35,833		206,744
Other
	Derivative financial instruments				2,046		2,804		1,853		1,190		698		1,742		5,182		3,032		−		18,547
	Investments in associates and
		joint ventures																			140		140
	Premises and equipment																				1,397		1,397
	Goodwill																				1,519		1,519
	Intangible assets																				1,360		1,360
	Other assets(1)				2,228		527		472		161		94		502		107		491		1,376		5,958
					4,274		3,331		2,325		1,351		792		2,244		5,289		3,523		5,792		28,921
					69,563		16,998		17,588		12,198		10,368		29,227		107,214		33,682		106,902		403,740

(1)    Amounts collectible on demand are considered to have no specified maturity.

Note 29 - Management of the Risks Associated With Financial Instruments (cont.)

																	As at October 31, 2022
					1 month or less		Over 1 month to 3 months		Over 3 months to 6 months		Over 6 months to 9 months		Over 9 months to 12 months		Over 1 year to 2 years		Over 2 years to 5 years		Over 5 years		No specified maturity		Total
Liabilities and equity
Deposits(1)(2)
	Personal				1,482		1,493		2,955		6,013		6,141		6,418		7,942		4,252		42,115		78,811
	Business and government				36,864		11,605		10,644		4,875		3,728		5,988		13,659		4,227		92,640		184,230
	Deposit-taking institutions				724		624		54		122		30		−		7		36		1,756		3,353
					39,070		13,722		13,653		11,010		9,899		12,406		21,608		8,515		136,511		266,394
Other
	Acceptances				5,967		554		20		−		−		−		−		−		−		6,541
	Obligations related
		to securities sold short(3)			428		394		634		74		920		1,493		3,948		6,386		7,540		21,817
	Obligations related to
		securities sold under
		repurchase agreements and
		securities loaned			16,233		5,445		1,567		3,406		−		22		−		−		6,800		33,473
	Derivative financial instruments				2,584		2,302		1,640		1,009		595		2,047		3,570		5,885		−		19,632
	Liabilities related to transferred
		receivables(4)			−		2,672		422		1,329		2,288		4,558		9,612		5,396		−		26,277
	Securitization - Credit card(5)				−		−		−		29		−		−		49		−		−		78
	Lease liabilities(5)				8		16		23		23		24		87		219		152		−		552
	Other liabilities - Other items(1)(5)				1,076		46		99		23		39		27		42		92		4,287		5,731
					26,296		11,429		4,405		5,893		3,866		8,234		17,440		17,911		18,627		114,101
Subordinated debt					−		−		−		−		−		−		−		1,499		−		1,499
Equity																					21,746		21,746
					65,366		25,151		18,058		16,903		13,765		20,640		39,048		27,925		176,884		403,740
Off-balance-sheet commitments
	Letters of guarantee and
		documentary letters of credit			180		1,451		1,338		982		1,398		1,292		138		−		−		6,779
	Credit card receivables(6)																				9,337		9,337
	Backstop liquidity and credit
		enhancement facilities(7)			−		15		5,552		15		−		−		−		−		3,125		8,707
	Commitments to extend credit(8)				3,126		9,205		6,179		6,678		3,270		4,066		3,186		39		46,368		82,117
	Obligations related to:
		Lease commitments(9)			1		1		2		2		2		6		9		8		−		31
		Other contracts(10)			38		42		47		46		47		21		34		−		102		377

(1)    Amounts payable upon demand or notice are considered to have no specified maturity.

(2)    The Deposits item is presented in greater detail than it is on the Consolidated Balance Sheet.

(3)    Amounts have been disclosed according to the residual contractual maturity of the underlying security.

(4)    These amounts mainly include liabilities related to the securitization of mortgage loans.

(5)    The Other liabilities item is presented in greater detail than it is on the Consolidated Balance Sheet.

(6)    These amounts are unconditionally revocable at the Bank's discretion at any time.

(7)    In the event of payment on one of the backstop liquidity facilities, the Bank will receive as collateral government bonds in an amount up to $5.6 billion.

(8)    These amounts include $44.8 billion that is unconditionally revocable at the Bank's discretion at any time.

(9)    These amounts include leases for which the underlying asset is of low value and leases other than for real estate of less than one year.

(10)   These amounts include $0.2 billion in contractual commitments related to the head office building under construction.

Note 30 - Segment Disclosures

The Bank carries out its activities in four business segments, which are defined below. For presentation purposes, other activities are grouped in the Other heading. Each reportable segment is distinguished by services offered, type of clientele, and marketing strategy. The presentation of segment disclosures is consistent with the presentation adopted by the Bank for the fiscal year beginning November 1, 2022. This presentation reflects a revision to the method used for the sectoral allocation of technology investment expenses, which are now immediately allocated to the various business segments, whereas certain expenses, notably costs incurred during the research phase of projects, had previously been recorded in the Other heading of segment results. This revision is consistent with the accounting policy change applied in fiscal 2022 related to cloud computing arrangements.

Personal and Commercial

The Personal and Commercial segment encompasses the banking, financing, and investing services offered to individuals, advisors and businesses as well as insurance operations.

Wealth Management

The Wealth Management segment comprises investment solutions, trust services, banking services, lending services and other wealth management solutions offered through internal and third-party distribution networks.

Financial Markets

The Financial Markets segment encompasses corporate banking and investment banking and financial solutions for large and mid-size corporations, public sector organizations, and institutional investors.

U.S. Specialty Finance and International (USSF&I)

The USSF&I segment encompasses the specialty finance expertise provided by the Credigy subsidiary; the activities of the ABA Bank subsidiary, which offers financial products and services to individuals and businesses in Cambodia; and the activities of targeted investments in certain emerging markets.

Other

This heading encompasses treasury activities; liquidity management; Bank funding; asset/liability management activities; the activities of the Flinks subsidiary, a fintech company specialized in financial data aggregation and distribution; certain specified items; and the unallocated portion of corporate units.

The segment disclosures are prepared in accordance with the accounting policies described in Note 1 to these consolidated financial statements, except for the net interest income, non-interest income, and income taxes (recovery) of the operating segments, which are presented on a taxable equivalent basis. Taxable equivalent basis is a calculation method that consists of grossing up certain revenues taxed at lower rates (notably dividends) by the income tax to a level that would make it comparable to revenues from taxable sources in Canada. An equivalent amount is added to income taxes (recovery). The effect of these adjustments is reversed under the Other heading. Operations support charges are allocated to each operating segment presented in the business segment results. The Bank assesses performance based on the net income attributable to the Bank's shareholders and holders of other equity instruments. Intersegment revenues are recognized at the exchange amount.

Note 30 - Segment Disclosures (cont.)

Results by Business Segment

Year ended October 31(1)
			Personal and Commercial				Wealth Management				Financial Markets				USSF&I				Other				Total
			2023		2022		2023		2022		2023		2022		2023		2022		2023		2022		2023		2022
Net interest income(2)			3,321		2,865		778		594		(1,054)		1,258		1,132		1,090		(591)		(536)		3,586		5,271
Non-interest income(2)(3)			1,195		1,169		1,743		1,781		3,710		1,210		77		20		(141)		201		6,584		4,381
Total revenues			4,516		4,034		2,521		2,375		2,656		2,468		1,209		1,110		(732)		(335)		10,170		9,652
Non-interest expenses(4)(5)(6)(7)			2,510		2,241		1,534		1,417		1,161		1,029		402		344		194		199		5,801		5,230
Income before provisions for
	credit losses and income taxes		2,006		1,793		987		958		1,495		1,439		807		766		(926)		(534)		4,369		4,422
Provisions for credit losses			238		97		2		3		39		(23)		113		66		5		2		397		145
Income before income taxes
	(recovery)		1,768		1,696		985		955		1,456		1,462		694		700		(931)		(536)		3,972		4,277
Income taxes (recovery)(2)(8)			486		449		271		254		401		388		146		143		(667)		(340)		637		894
Net income			1,282		1,247		714		701		1,055		1,074		548		557		(264)		(196)		3,335		3,383
Non-controlling interests			−		−		−		−		−		−		−		−		(2)		(1)		(2)		(1)
Net income attributable to the
	Bank's shareholders and holders of other equity instruments		1,282		1,247		714		701		1,055		1,074		548		557		(262)		(195)		3,337		3,384
Average assets(9)			148,511		140,300		8,560		8,440		180,837		154,349		23,007		18,890		69,731		71,868		430,646		393,847
Total assets			154,728		146,668		8,666		8,486		178,784		157,803		25,308		21,217		56,092		69,566		423,578		403,740

(1)    For the year ended October 31, 2022, certain amounts were reclassified, notably due to a revised method for the sectoral allocation of technology investment expenses.

(2)    For the year ended October 31, 2023, Net interest income was grossed up by $332 million ($234 million in 2022), Non-interest income was grossed up by $247 million ($48 million in 2022), and an equivalent amount was recognized in Income taxes (recovery). The effects of these adjustments have been reversed under the Other heading.

(3)    For the year ended October 31, 2023, the Bank concluded that it had lost significant influence over TMX and therefore ceased using the equity method to account for this investment. The Bank designated its investment in TMX as a financial asset measured at fair value through other comprehensive income in an amount of $191 million. Upon the fair value measurement, a $91 million gain was recorded in the Non-interest income item of the Other heading.

(4)    For the year ended October 31, 2023, the Bank recorded $75 million in intangible asset impairment losses on technology development in the Non-interest expenses item of the following segments: Personal and Commercial ($59 million), Wealth Management ($8 million), Financial Markets ($7 million), and in the Other heading ($1 million). Moreover, it recorded $11 million in premises and equipment impairment losses related to right-of-use assets in the Non-interest expenses item of the Other heading.

(5)    For the year ended October 31, 2023, the Bank recorded $35 million in litigation expenses to resolve litigations and other disputes arising from various ongoing or potential claims against the Bank in the Non-interest expenses item of the Wealth Management segment.

(6)    For the year ended October 31, 2023, the Non-interest expenses item of the Other heading included an expense of $25 million related to the retroactive impact of the changes to the Excise Tax Act, indicating that payment card clearing services rendered by a payment card network operator are subject to the goods and services tax (GST) and the harmonized sales tax (HST).

(7)    For the year ended October 31, 2023, the Bank recorded in the Non-interest expenses item $15 million in charges for (i) contract termination penalties (Personal and Commercial segment: $9 million) and for (ii) provisions for onerous contracts (Other heading: $6 million).

(8)    For the year ended October 31, 2023, the Bank recorded a $32 million tax expense with respect to the Canada Recovery Dividend, i.e., a one-time, 15% tax on the fiscal 2021 and 2020 average taxable income above $1 billion, as well as an $8 million tax recovery related to a 1.5% increase in the statutory tax rate, which includes the impact related to current and deferred taxes for fiscal 2022. These items are recorded in the Other heading. For additional information on these tax measures, see Note 24.

(9)    Represents an average of the daily balances for the period, which is also the basis on which sectoral assets are reported in the business segments.

Results by Geographic Segment

Year ended October 31
		Canada				United States				Other				Total
		2023		2022		2023		2022		2023		2022		2023		2022
Net interest income		1,901		3,758		1,051		773		634		740		3,586		5,271
Non-interest income(1)		5,812		4,299		98		18		674		64		6,584		4,381
Total revenues		7,713		8,057		1,149		791		1,308		804		10,170		9,652
Non-interest expenses(2)(3)(4)(5)		5,261		4,760		226		209		314		261		5,801		5,230
Income before provisions for credit losses and income taxes		2,452		3,297		923		582		994		543		4,369		4,422
Provisions for credit losses		284		79		81		35		32		31		397		145
Income before income taxes		2,168		3,218		842		547		962		512		3,972		4,277
Income taxes(6)		371		723		68		67		198		104		637		894
Net income		1,797		2,495		774		480		764		408		3,335		3,383
Non-controlling interests		(2)		(1)		−		−		−		−		(2)		(1)
Net income attributable to the Bank's shareholders and   holders of other equity instruments		1,799		2,496		774		480		764		408		3,337		3,384
Average assets(7)		355,337		324,415		29,116		29,988		46,193		39,444		430,646		393,847
Total assets		348,073		336,215		29,968		27,986		45,537		39,539		423,578		403,740

(1)    For the year ended October 31, 2023, the Bank concluded that it had lost significant influence over TMX and therefore ceased using the equity method to account for this investment. The Bank designated its investment in TMX as a financial asset measured at fair value through other comprehensive income in an amount of $191 million. Following the fair value measurement, a $91 million gain was recorded in the Non-interest income item in Canada.

(2)    For the year ended October 31, 2023, the Bank recorded $75 million in intangible asset impairment losses on technology development, and it recorded $11 million in premises and equipment impairment losses related to right-of-use assets in the Non-interest expenses item in Canada.

(3)    For the year ended October 31, 2023, the Bank recorded $35 million in litigation expenses to resolve litigations and other disputes arising from various ongoing or potential claims against the Bank in the Non-interest expenses item in Canada.

(4)    For the year ended October 31, 2023, the Non-interest expenses item in Canada included an expense of $25 million related to the retroactive impact of the changes to the Excise Tax Act, indicating that payment card clearing services rendered by a payment card network operator are subject to the goods and services tax (GST) and the harmonized sales tax (HST).

(5)    For the year ended October 31, 2023, the Bank recorded, in the Non-interest expenses item in Canada, $15 million in charges for (i) contract termination penalties and for (ii) provisions for onerous contracts.

(6)    For the year ended October 31, 2023, the Bank recorded a $32 million tax expense with respect to the Canada Recovery Dividend, i.e., a one-time, 15% tax on the fiscal 2021 and 2020 average taxable income above $1 billion, as well as an $8 million tax recovery related to a 1.5% increase in the statutory tax rate, which includes the impact related to current and deferred taxes for fiscal 2022. These items are recorded in Canada. For additional information on these tax measures, see Note 24.

(7)    Represents an average of the daily balances for the period.

Note 31 - Event After the Consolidated Balance Sheet Date

Repurchase of Common Shares

On November 30, 2023, the Bank's Board of Directors approved a normal course issuer bid, beginning December 12, 2023, to repurchase for cancellation up to 7,000,000 common shares (representing approximately 2.07% of its then outstanding common shares) over the 12-month period ending December 11, 2024. Any repurchase through the Toronto Stock Exchange will be done at market prices. The common shares may also be repurchased through other means authorized by the Toronto Stock Exchange and applicable regulations, including private agreements or share repurchase programs under issuer bid exemption orders issued by the securities regulators. A private purchase made under an exemption order issued by a securities regulator will be done at a discount to the prevailing market price. The amounts that are paid above the average book value of the common shares are charged to Retained earnings. This normal course issuer bid is subject to the approval of OSFI and the Toronto Stock Exchange (TSX).

 

Supplementary

Information

			Statistical Review	234
			Information for Shareholders	236

Statistical Review

As at October 31 or   for the year ended October 31(1)
(millions of Canadian dollars)			2023		2022		2021		2020		2019		2018		2017		2016		2015		2014
Consolidated Balance Sheet data
Cash and deposits with financial institutions			35,234		31,870		33,879		29,142		13,698		12,756		8,802		8,183		7,567		8,086
Securities			121,818		109,719		106,304		102,131		82,226		69,783		65,343		64,541		56,040		52,953
Securities purchased under reverse
	repurchase agreements and securities borrowed		11,260		26,486		7,516		14,512		17,723		18,159		20,789		13,948		17,702		24,525
Loans and acceptances, net of allowances			225,443		206,744		182,689		164,740		153,251		146,082		136,457		128,036		116,676		106,959
Other assets			29,823		28,921		25,233		20,963		14,475		15,661		14,433		17,498		18,105		12,906
Total assets			423,578		403,740		355,621		331,488		281,373		262,441		245,824		232,206		216,090		205,429
Deposits			288,173		266,394		240,938		215,878		189,566		170,830		156,671		142,066		130,458		119,883
Other liabilities			110,979		114,101		95,233		98,589		75,983		76,539		75,589		77,026		72,755		73,163
Subordinated debt			748		1,499		768		775		773		747		9		1,012		1,522		1,881
Share capital and other equity instruments
	Preferred shares and other equity instruments		3,150		3,150		2,650		2,950		2,450		2,450		2,050		1,650		1,023		1,223
	Common shares		3,294		3,196		3,160		3,057		2,949		2,822		2,768		2,645		2,614		2,293
Contributed surplus			68		56		47		47		51		57		58		73		67		52
Retained earnings			16,744		15,140		12,854		10,307		9,227		8,442		7,703		6,706		6,705		5,850
Accumulated other comprehensive income			420		202		(32)		(118)		16		175		168		218		145		289
Non-controlling interests			2		2		3		3		358		379		808		810		801		795
Total liabilities and equity			423,578		403,740		355,621		331,488		281,373		262,441		245,824		232,206		216,090		205,429
Average assets(2)			430,646		393,847		363,506		318,087		286,162		265,940		248,351		235,913		222,929		206,680
Net impaired loans excluding POCI loans(3)(4)   under IFRS 9			606		479		283		465		450		404
Net impaired loans excluding POCI loans(4)   under IAS 39															206		281		254		248
Consolidated Statement of Income data
Net interest income			3,586		5,271		4,783		4,255		3,596		3,382		3,436		3,205		2,929		2,761
Non-interest income			6,584		4,381		4,144		3,672		3,836		3,784		3,173		2,635		2,817		2,703
Total revenues			10,170		9,652		8,927		7,927		7,432		7,166		6,609		5,840		5,746		5,464
Non-interest expenses			5,801		5,230		4,903		4,616		4,375		4,100		3,861		3,875		3,665		3,423
Income before provisions for credit losses   and income taxes			4,369		4,422		4,024		3,311		3,057		3,066		2,748		1,965		2,081		2,041
Provisions for credit losses			397		145		2		846		347		327		244		484		228		208
Income taxes			637		894		882		434		443		534		483		225		234		295
Net income			3,335		3,383		3,140		2,031		2,267		2,205		2,021		1,256		1,619		1,538
Non-controlling interests			(2)		(1)		−		42		66		87		84		75		70		69
Net income attributable to the Bank's
	shareholders and holders of other equity instruments		3,337		3,384		3,140		1,989		2,201		2,118		1,937		1,181		1,549		1,469

(1)    Certain amounts from fiscal years 2017 to 2021 were adjusted in 2022 to reflect an accounting policy change applicable to cloud computing arrangements, aside from the average assets figures for fiscal years 2017 to 2019.

(2)    Represents an average of the daily balances for the period.

(3)    Given the adoption of IFRS 9, all loans classified in Stage 3 of the expected credit loss model are impaired loans. Under IAS 39, loans were considered impaired according to different criteria. Net impaired loans are presented net of allowances for credit losses on Stage 3 loan amounts drawn and, in this table, the net impaired loans presented exclude POCI loans.

(4)    Includes customers' liability under acceptances.

As at October 31(1)				2023			2022		2021		2020		2019		2018		2017		2016		2015		2014
Number of common shares(2)
	(thousands)			338,285			336,582		337,912		335,998		334,172		335,071		339,592		338,053		337,236		329,297
Basic earnings per share(2)			$	9.47		$	9.72	$	8.95	$	5.57	$	6.22	$	5.93	$	5.43	$	3.31	$	4.56	$	4.36
Diluted earnings per share(2)			$	9.38		$	9.61	$	8.85	$	5.54	$	6.17	$	5.86	$	5.37	$	3.29	$	4.51	$	4.32
Dividend per share(2)			$	3.98		$	3.58	$	2.84	$	2.84	$	2.66	$	2.44	$	2.28	$	2.18	$	2.04	$	1.88
Share price(2)
	High		$	103.58		$	105.44	$	104.32	$	74.79	$	68.02	$	65.63	$	62.74	$	47.88	$	55.06	$	53.88
	Low		$	84.97		$	83.12	$	65.54	$	38.73	$	54.97	$	58.69	$	46.83	$	35.83	$	40.75	$	41.60
	Close		$	86.22		$	92.76	$	102.46	$	63.94	$	68.02	$	59.76	$	62.61	$	47.88	$	43.31	$	52.68
Book value(2)(3)			$	60.68		$	55.24	$	47.44	$	39.56	$	36.64	$	34.31	$	31.50	$	28.52	$	28.26	$	25.76
Dividends on preferred
	shares
	Series 16			-			-		-		-		-		-		-		-		-	$	1.2125
	Series 20			-			-		-		-		-		-		-		-	$	1.5000	$	1.5000
	Series 24			-			-		-		-		-		-		-		-		-	$	0.4125
	Series 26			-			-		-		-		-		-		-		-		-	$	0.4125
	Series 28			-			-		-		-		-		-	$	0.9500	$	0.9500	$	0.9500	$	0.9500
	Series 30		$	1.0063		$	1.0063	$	1.0063	$	1.0063	$	1.0156	$	1.0250	$	1.0250	$	1.0250	$	1.0250	$	0.7849
	Series 32		$	0.9598		$	0.9598	$	0.9598	$	0.9636	$	0.9750	$	0.9750	$	0.9750	$	0.9750	$	1.0760		-
	Series 34			-			-	$	0.7000	$	1.4000	$	1.4000	$	1.4000	$	1.4000	$	1.1373		-		-
	Series 36			-			-	$	1.0125	$	1.3500	$	1.3500	$	1.3500	$	1.3500	$	0.5733		-		-
	Series 38		$	1.7568		$	1.1125	$	1.1125	$	1.1125	$	1.1125	$	1.1125	$	0.4724		-		-		-
	Series 40		$	1.3023		$	1.1500	$	1.1500	$	1.1500	$	1.1500	$	0.9310		-		-		-		-
	Series 42		$	1.2375		$	1.2375	$	1.2375	$	1.2375	$	1.2375	$	0.5323		-		-		-		-
LRCN interests
	Series 1			4.30	%		4.30	%	4.30	%	4.30	%	-		-		-		-		-		-
	Series 2			4.05	%		4.05	%	4.05	%	-		-		-		-		-		-		-
	Series 3			7.50	%		7.50	%	-		-		-		-		-		-		-		-
Financial ratios
Return on common
	shareholders' equity(3)			16.5	%		18.8	%	20.7	%	14.6	%	18.0	%	18.4	%	18.1	%	11.7	%	16.9	%	17.9	%
Return on average assets(3)				0.77	%		0.86	%	0.86	%	0.64	%	0.81	%	0.84	%	0.81	%	0.53	%	0.73	%	0.74	%
Regulatory ratios under    Basel III(4)
Capital ratios
	CET1			13.5	%		12.7	%	12.4	%	11.8	%	11.7	%	11.7	%	11.2	%	10.1	%	9.9	%	9.2	%
	Tier 1			16.0	%		15.4	%	15.0	%	14.9	%	15.0	%	15.5	%	14.9	%(5)	13.5	%	12.5	%(6)	12.3	%(7)
	Total			16.8	%		16.9	%	15.9	%	16.0	%	16.1	%	16.8	%	15.1	%(5)	15.3	%	14.0	%(8)	15.1	%(7)
Leverage ratio				4.4	%		4.5	%	4.4	%	4.4	%	4.0	%	4.0	%	4.0	%	3.7	%	4.0	%
TLAC ratio(9)				29.2	%		27.7	%	26.3	%	23.7	%
TLAC leverage ratio(9)				8.0	%		8.1	%	7.8	%	7.0	%
Liquidity coverage ratio   (LCR)(10)				155	%		140	%	154	%	161	%	146	%	147	%	132	%	134	%	131	%
Net stable funding ratio   (NSFR)(10)				118	%		117	%	117	%
Other information
Number of employees(11)				28,916			27,103		24,495		25,604		24,557		22,426		20,584		20,600		19,026		18,725
Branches in Canada				368			378		384		403		422		428		429		450		452		452
Banking machines in Canada				944			939		927		940		939		937		931		938		930		935

(1)    Certain amounts from fiscal years 2017 to 2021 have been adjusted to reflect an accounting policy change in 2022 applicable to cloud computing arrangements, aside from the return on common shareholders' equity and return on average assets figures for fiscal years 2017 to 2019.

(2)    The figures for 2014 have been adjusted to reflect the stock dividend paid in 2014.

(3)    See the Glossary section on pages 124 to 127 for details on the composition of these measures.

(4)    Ratios as at October 31, 2022, 2021 and 2020 are calculated in accordance with the Basel III rules, as set out in OSFI's Capital Adequacy Requirements Guideline and Leverage Requirements Guideline, and reflect the transitional measures granted by OSFI.

(5)    Taking into account the redemption of the Series 28 preferred shares on November 15, 2017.

(6)    Taking into account the redemption of the Series 20 preferred shares on November 15, 2015.

(7)    Taking into account the redemption of the Series 16 preferred shares on November 15, 2014.

(8)    Taking into account the redemption of the Series 20 preferred shares on November 15, 2015 and the $500 million redemption of notes on November 2, 2015.

(9)    The TLAC ratio and the TLAC leverage ratio are calculated in accordance with OSFI's Total Loss Absorbing Capacity Guideline.

(10)   The LCR ratio and the NSFR ratio are calculated in accordance with OSFI's Liquidity Adequacy Requirements Guideline.

(11)   Full-time equivalent. The methodology was refined during fiscal 2023 and the fiscal 2022 and 2021 figures have been restated.

Information for Shareholders

Description of Share Capital

The authorized share capital of the Bank consists of an unlimited number of common shares, without par value, an unlimited number of first preferred shares, without par value, issuable for a maximum aggregate consideration of $5 billion, and 15 million second preferred shares, without par value, issuable for a maximum aggregate consideration of $300 million. As at October 31, 2023, the Bank had a total of 338,284,629 common shares and  66,000,000 first preferred shares issued and outstanding.

Stock Exchange Listings

The Bank's common shares and Series 30, 32, 38, 40 and 42 First Preferred Shares are listed on the Toronto Stock Exchange in Canada.

Issue or class		Ticker symbol
Common shares		NA
First Preferred Shares
	Series 30	NA.PR.S
	Series 32	NA.PR.W
	Series 38	NA.PR.C
	Series 40	NA.PR.E
	Series 42	NA.PR.G

Number of Registered Shareholders

As at October 31, 2023, there were 19,881 common shareholders recorded in the Bank's common share register.

Dividends

Dividend Dates in Fiscal 2024

(subject to approval by the Board of Directors of the Bank)

Record date			Payment date
Common shares
	December 25, 2023		February 1, 2024
	March 25, 2024		May 1, 2024
	June 24, 2024		August 1, 2024
	September 30, 2024		November 1, 2024
Preferred shares,
	Series 30, 32, 38, 40 and 42
	January 8, 2024		February 15, 2024
	April 5, 2024		May 15, 2024
	July 8, 2024		August 15, 2024
	October 7, 2024		November 15, 2024

Dividends Declared on Common Shares During Fiscal 2023

Record date		Payment date		Dividend per share ($)
December 26, 2022		February 1, 2023		0.97
March 27, 2023		May 1, 2023		0.97
June 26, 2023		August 1, 2023		1.02
September 25, 2023		November 1, 2023		1.02

Dividends Declared on Preferred Shares During Fiscal 2023

Record date		Dividend per share ($)
	Payment date	Series 30	Series 32	Series 38	Series 40	Series 42
January 6, 2023	February 15, 2023	0.2516	0.2399	0.4392	0.2875	0.3094
April 5, 2023	May 15, 2023	0.2515	0.2400	0.4392	0.2875	0.3094
July 6, 2023	August 15, 2023	0.2516	0.2399	0.4392	0.3636	0.3093
October 6, 2023	November 15, 2023	0.2516	0.2400	0.4392	0.3637	0.3094

Dividends paid are "eligible dividends" in accordance with the Income Tax Act (Canada).

Dividend Reinvestment and Share Purchase Plan

National Bank has a Dividend Reinvestment and Share Purchase Plan for holders of its common and preferred shares under which they can acquire common shares of the Bank without paying commissions or administration fees. Participants acquire common shares through the reinvestment of cash dividends paid on the shares they hold or through optional cash payments of at least $1 per payment, up to a maximum of $5,000 per quarter.

For additional information, shareholders may contact National Bank's registrar and transfer agent, Computershare Trust Company of Canada, at 1‑888‑838‑1407. To participate in the plan, National Bank's beneficial or non-registered common shareholders must contact their financial institution or broker.

Direct Deposit

Shareholders may elect to have their dividend payments deposited directly via electronic funds transfer to their bank account at any financial institution that is a member of the Canadian Payments Association. To do so, they must send a written request to the transfer agent, Computershare Trust Company of Canada.

Head Office

National Bank of Canada

600 De La Gauchetière Street West, 4^th Floor

Montreal, Quebec  H3B 4L2  Canada

Telephone:            514-394-5000

Website:      nbc.ca

Annual Meeting

The Annual Meeting of Holders of Common Shares of the Bank will be held on April 19, 2024.

Corporate Social Responsibility Statement

The information will be available in March 2024 on the Bank's website at nbc.ca.

Communication with Shareholders

For information about stock transfers, address changes, dividends, lost certificates, tax forms and estate transfers, shareholders of record may contact the transfer agent at the following address: 

Computershare Trust Company of Canada

Share Ownership Management

100 University Avenue, 8^th Floor

Toronto, Ontario  M5J 2Y1  Canada

Telephone:            1-888-838-1407

Fax:              1-888-453-0330

E-mail:         [e-mail]

Website:      computershare.com

Shareholders whose shares are held by a market intermediary are asked to contact the market intermediary concerned.

Other shareholder inquiries can be addressed to:

Investor Relations

National Bank of Canada

600 De La Gauchetière Street West, 7^th Floor

Montreal, Quebec  H3B 4L2  Canada

Telephone:            1-866-517-5455

E-mail:         [e-mail]

Website:      nbc.ca/investorrelations

Caution Regarding Forward-Looking Statements

From time to time, National Bank of Canada makes written and oral forward‑looking statements, including in this Annual Report, in other filings with Canadian regulators, in reports to shareholders, in press releases and in other communications. These statements are made pursuant to the Canadian and American securities legislation.

The Caution Regarding Forward-Looking Statements section can be found on page 13 of this Annual Report.

Trademarks

The trademarks belonging to National Bank of Canada and used in this report include National Bank of Canada, National Bank, NBC, NBC Financial Markets, National Bank Financial, NAventures, National Bank Financial-Wealth Management, Private Banking 1859, National Bank Direct Brokerage, National Bank Investments, NBI, National Bank Independent Network, National Bank Trust, National Bank Life Insurance, Natcan Trust Company, National Bank Realty, Natbank and their respective logos. Certain trademarks owned by third parties are also mentioned in this report.

Pour obtenir une version française du Rapport annuel,

veuillez vous adresser à :

Relations avec les investisseurs

Banque Nationale du Canada

600, rue De La Gauchetière Ouest, 7^e étage

Montréal (Québec)  H3B 4L2  Canada

Téléphone :                   1 866 517-5455

Adresse électronique :            [e-mail]

Legal Deposit

ISBN 978-2-921835-79-4

Legal deposit - Bibliothèque et Archives nationales du Québec, 2023

Legal deposit - Library and Archives Canada, 2023

Printing

L'Empreinte

National Bank of Canada participates in a carbon neutral program and purchased carbon credits to offset the greenhouse gases emitted to produce this paper and is proud to help save the environment by using EcoLogo and Forest Stewardship Council^® (FSC^®) certified paper.

 

END